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Indonesia may reintroduce palm oil export tax

March 20, 2015

Top world palm oil producer Indonesia may reintroduce an export tax on crude palm oil (CPO) following Malaysia’s imposition on Tuesday of a 4.5% export duty on CPO.

, Indonesia may reintroduce palm oil export tax

(Friday, 20 March 2015) Top world palm oil producer Indonesia may reintroduce an export tax on crude palm oil (CPO) following Malaysia’s imposition on Tuesday of a 4.5% export duty on CPO.

The Malaysian tax will be effective from April, following seven months of duty-free exports since September 2014.

This is a result of CPO prices averaging RM2,288.41 (US$612) in the past month, surpassing the CPO tax threshold of RM2,250 (US$602)/tonne.

"Since this higher average pricing in the past month is well within the RM2,400 (US$641)/tonne bandwidth, the CPO tax is 4.5%," said Plantation Industry & Commodities Minister Datuk Amar Douglas Uggah Embas.

Indonesia may also follow suit to aid its domestic palm oil processing industry.

According to Derom Bangun, chairman of the Indonesian Palm Oil Board (IPOB), government ministries were now in talks to cut the current monthly threshold for its CPO export tax from US$750/tonne to between US$500-$600/tonne.

When international and local CPO prices average below US$750/tonne, Indonesia currently cuts the CPO export tax it sets each month to zero. Depending on how far above US$750/tonne average prices climb, the CPO export tax can rise to a maximum of 22.5%.

"The Ministry of Industry especially would like to have this change so the downstream industry, which is now in a difficult situation, can get back to full operations," Bangun told the Star newspaper.

Indonesia has had a zero export tax since October.

Palm oil prices have been stagnating, with Malaysian palm oil futures falling 20% over the last year as its struggles with poor global demand and abundant supplies of competing oils.

On Thursday’s close, the benchmark June contract on the Bursa Malaysia Derivatives edged up 0.6% to 2,206 ringgit ($596)/tonne.


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