03/10/2011 (The Star) -  The plantation sector, one of the most heavily-taxed industries, is hoping that the Government will allocate more incentives and tax rebates under Budget 2012.

The total tax paid by the sector has exceeded 46% in the form of taxes, cess, levy and export duty.

According to an industry player who is a member of the Malaysian Palm Oil Association (MPOA), the Government has set a targeted gross national income (GNI) for the oil palm sector at RM187bil by 2020 from RM60bil currently.

In addition, the total investment required to achieve the target is estimated at RM124bil, of which 95% will need to come from the private sector.

“It will be difficult to help the Government to attain the targeted GNI if we continue to be heavily burdened with taxes,” he added.

The industry player pointed out that if the plantation sector was not too heavily taxed, many could undertake more reinvestment, new planting and replanting areas that would enable the National Key Economic Area for palm oil to meet its targeted GNI successfully by 2020.

“Of priority is the abolition of taxes for the palm oil windfall profit tax (WPT) and the cooking oil subsidy scheme (COSS).

“The MPOA has forwarded various proposals to the Plantation Industries and Commodities Ministry and also, Finance Minister Datuk Seri Najib Tun Razak a few months ago,” he added.

Meanwhile, United Malacca Bhd chief executive officer Dr Leong Tat Thim told StarBiz that the Government should consider giving more tax rebates given the rise in labour cost, foreign workers' levy and fertiliser prices.

Under the new wage scheme by the Malayan Agricultural Producers Association (Mapa), estate workers will receive RM650 per month in guaranteed earnings and a special additional remuneration payment of RM200 per month.

Also, effective Sept 1, the levy on foreign workers has been raised by RM50 to RM590 per worker from RM540 previously.

“All these additional costs are considerably pushing up the cost of production (COP) among upstream plantation players,” he said.

Of the total COP for planters, the average labour costs represent about 20% to 30% or lower, depending on the state of mechanisation to harvest fresh fruit bunches at the estates.

Leong also highlighted the plight of local oleochemicals, biodiesel and palm oil refiners whose businesses are deemed uncompetitive given Indonesia's move to slash its CPO export duty by more than 50% recently.

“The Government must consider reviewing our CPO export duty as the impact from Indonesia's move is severe. The local downstream sector will earn less as their products cannot compete with the lower priced Indonesian palm oil goods.

“This may result in lower exports and rise in local palm oil stocks, thus leading to the price of CPO to be traded lower given the surplus in stocks,” explained Leong.

United Plantations Bhd executive director Datuk Carl Bek-Nielsen, meanwhile, wants the Government to consider the continuation of reinvestment allowance for plantation companies.

“This will enable companies to be incentivised to upgrade their facilities so that local plantation players can compete better with the Indonesian plantations' low labour costs.

 Palm oil fruits
 
“In addition, there is a need to provide tax incentives when plantation companies invest in items that will promote mechanisation in the estates, thus reducing the current local dependency on labour,” said Bek-Nielsen.