25/03/2011 (The Star) - The plantation sector, one of the most heavily-taxed sectors in the country, is urging the Government to seriously re-consider abolishing or reviewing the imposed crude palm oil (CPO) windfall profit tax (WPT) for the sector.

An industry source claim that while most sectors of the economy had to pay just 26% corporate tax, the total tax paid by the plantation sector had exceeded 46% which is 20% more than other sectors.

The source told StarBiz that the current tax exposure among plantation players was high especially when they had to pay a series of tax, cess, levy as well as sales tax for oil palm planters in Sabah and Sarawak imposed by the state government.

Therefore, in an unprecedented move, four national oil palm associations which represents over 80% of the country's oil palm fraternity submitted a joint memorandum to the Prime Minister Datuk Seri Najib Tun Razak seeking his assistance on the issue last month.

The WPT falls under the jurisdiction of the Finance Ministry (MOF) of which Najib is also the Finance Minister.

According to the source, Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners Association (MEOA), Sarawak Oil Palm Plantation Owners Association (SOPPOA) and Sabah-based East Malaysia Planters Association (EMPA) were now waiting in anticipation for a positive outcome from the MOF.

The source said previously only MEOA and SOPPOA which represent mostly smaller estate owners below 1,000ha as well as new oil palm plantation players were considered to be most vocal on the WPT.

“But now, all (the national associations) have agreed to push for an abolishment or at least a review on WPT particularly when CPO is still bullishly traded above the RM3,000 per tonne level,” the source said.

For peninsula-based oil palm plantation players, a 15% WPT will be imposed when the CPO price threshold reach RM2,500 per tonne and above.

For Sabah and Sarawak oil palm planters, a 7.5% WPT will be imposed when the CPO price hit RM3,000 per tonne and above.

“Actually not all oil palm planters are deemed profitable and laughing their way to the bank just because the CPO price is above RM3,000 per tonne compared to the cost of production (COP) of RM1,100 to RM1,200 per tonne for efficient planters,” the source said.

He questioned the profitability of new players, particularly in Sarawak, with younger palm trees which were not as productive and still forking out higher COP at RM1,500 to RM2,000 per tonne compared to their peers in the peninsula and Sabah.

“If the MOF is reluctant to abolish the WPT, why not meet us (the industry players) halfway by reviewing the current CPO price threshold for WPT?” the source said.

SOPPOA had previously said a realistic tax regime was needed as palm oil would be a long-term investment.

MEOA, meanwhile, had said MOF should either abolish or at least review the mode of levy based on fresh fruit bunches (FFB) produced by plantation holdings of 40.46ha (defined as estate) and above whenever the price of CPO reaches the threshold of RM2,500 a tonne for the peninsula and RM3,000 a tonne for Sabah and Sarawak.

“The ground of appeal is that it is flawed, unfair and inequitable because not all estates are making windfall or extraordinary profit when the price of CPO surpassed the threshold level.

“Profitability of oil palm plantations varies in relation to age and productivity of the palms,” said MEOA.