01 May 2012

Indonesia increases crude palm oil (CPO) Export Tax from 18% to 19.5%

Top global palm oil producer Indonesia will increase its export tax for crude palm oil ( CPO) to 19.5 percent for May from 18 percent in April due to higher international prices, a trade ministry official said on Monday.

The government will also raise its raise the export tax for RBD palm olein to 10 percent in May, versus 9 percent in April, Deddy Saleh, the director general of foreign trade at the trade ministry, told Reuters.

Indonesia sets its commodity export taxes on a monthly basis.

"CPO export tax for May is 19.5 percent because its price in international market in the last one month was increasing," Saleh said.

He also said the government would leave its tax on cocoa beans unchanged at 5 percent for May due to stable international prices.

Southeast Asia's largest economy has a palm export tax system that aims to boost downstream industries, secure domestic supplies and reduce volatility in cooking oil prices.

The tax rate for the following month is calculated based on CIF Rotterdam prices, Malaysian benchmark and Jakarta futures prices.

By the midday break on Monday, benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange lost 0.1 percent to 3,501 ringgit ($1,155) per tonne. Throughout April, prices have gained about 2 percent.

Last August, Indonesia set new palm oil export tax rules which include setting the minimum level for the CPO export tax at 7.5 percent versus 1.5 percent previously.

Source: www.thestar.com.my

Note: Some of Malaysia's largest palm oil players have presence in Indonesia. For instances, Sime Darby website indicates that it has presence in eight provinces in Indonesia with a total landbank of 285,571 hectares out of which 207,889 are planted with oil palm, representing approximately 40% of the company’s total planted area.The question is how significant will this increase in export tax impact to their profitability?


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