26/01/2011 (The Jakarta Post) - The Indonesian Palm Oil Producers Association (Gapki) called on the government to reduce the export tax imposed on crude palm oil (CPO), which is set to be increased to 25 percent next month.

Gapki chairman Fadhil Hasan said Tuesday that the progressive tax system imposed on CPO exports severely hurt producers because they had to pay higher taxes whenever there was an increase in international palm oil prices.

With market prices surging in recent months, the export tax paid by producers has become unrealistically high, he said, adding that the export tax on CPO, which was only 10 percent in November, had increased sharply to 20 percent in January.

On Tuesday, the Trade Ministry further increased the CPO export tax to 25 percent for February as an adjustment to the January rise in prices.

“Current progressive export taxes are reducing the competitiveness of our products and industry. Farmers also don’t benefit from higher CPO prices,” Fadhil told The Jakarta Post.

The CPO reference price is set by the government to determine CPO export taxes. Oil palm prices are now established according to the average price index in the commodities exchange in Rotterdam, the Netherlands, a month before the establishment of the export base price.

Fadhil said the government should use a flat tax rate on CPO exports to ensure producers as well as farmers could benefits from the surge in prices. He said 3 percent would be an ideal tax for CPO exports. “The 3 percent tax can be imposed only when the price exceeds US$700 per ton.”

Gapki said Indonesia’s palm oil export volume increased 0.8 percent to 15.66 million tons last year from 15.53 million tons in 2009 on the back of high export volumes to three major importers: India, China and the EU.

Palm oil exports to India topped 5.79 million tons last year, up 2.9 percent from 5.63 million tons in 2009. Exports to the EU reached 3.73 million tons, while exports to China reached 2.41 million tons.

He explained that the export volume of palm oil jumped 64 percent to US$16.4 billion in 2010 from $10 billion in 2009 on the back of rising prices, especially in the fourth quarter of last year.

Fadhil added that CPO prices would likely continue to increase this year due to decreased supply.

“The CPO prices may range from $1,000 to $1,200 until the [end of the] first half of 2011,” Fadhil said.