KUALA LUMPUR (Dec 1): The Malaysian Estate Owners' Association (MEOA) is calling for taxes it deems to be unfair levied on the oil palm industry to be suspended or abolished.

In a statement, the MEOA specifically pointed to the windfall profit levy (WPL) on crude palm oil (CPO), Sabah's 7.5% sales tax on CPO and Sarawa'sk 5% sales tax on sales of CPO and crude palm kernel oil (CPKO).

According to the association, these taxes collectively amounted to an estimated RM1.3 billion in 2019 when CPO prices averaged at RM2,079 per tonne.

Based on 2019’s production figures and assuming CPO prices are sustained at RM3,200 a tonne, the MEOA expects these taxes to result in proceeds of RM2.8 billion a year.

Citing Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz’s comments that the imposition of a windfall profit levy on glove manufacturers would make investors think twice before investing in the country, the association asked whether this policy thinking would be expanded to the palm oil industry when it comes to the WPL. 

“It should be pointed out that no oil palm planter would be rejoicing at today’s palm oil prices, given the cumulative effect of relentless cost increases over the years.

"Today’s derived margin set against many years of unabated production cost increases is certainly not windfall profits (sic). The oil palm industry is a long-haul business, and growers need to recoup and reinvest for the industry to be competitive and remain sustainable,” it noted. 

The WPL is imposed in Peninsular Malaysia whenever CPO prices exceed RM2,500 per tonne, and in Sabah and Sarawak when CPO prices exceed RM3,000 per tonne.

The MEOA is estimating RM760 million a year to be collected at a price assumption of RM3,200 a tonne. It noted that even the Malaysian Palm Oil Board's (MPOB) estimate of RM500 million from the WPL in 2021 would exceed the RM400 million donated by several glove manufacturers to the government’s Covid-19 Fund.

In Sarawak, it noted that sales taxes on CPO and CPKO amounted to RM520 million in 2019.

The MEAO said the taxes levied on revenue, rather than profits, are a heavy burden on the sustainability of oil palm operations (especially when CPO prices are low) and Sarawak planters as many were late starters vis-à-vis Peninsular Malaysia or Sabah planters in oil palm cultivation.

For 2019, the MEOA estimated that RM520 million were collected, representing 34% of the estimated economic profitability of plantation operations.

“The MEOA implores the Sabah state government to consider the possibility of reducing or abolishing the 7.5% CPO sales tax, which amounted to an estimated RM791 million in 2019. As this is a tax on revenue rather than profits, the MEOA calculated that this amounted to an outsize 44% of economic profits in 2019 when CPO prices were low,” it added.