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Windfall Profit Levy on CPO

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Dear Sir,

I would like to refer to the The Star newspaper  on 1 May 2009 which stated that MPOA will urge the Government to abolish the Windfall Profit Levy (WPL) on palm oil. This proposal by MPOA seems to be beneficial to the industry but we should look into its implications on the palm oil industry.

The WPL will only be activated at the CPO price of RM 2,500 and at the present monthly average price at RM 2,500, the industry do not have to pay anything. The WPL imposed by the Treasury is the replacement of MPOBs Cess to finance the cooking oil subsidy.

If the WPL is abolished, the on going cooking oil subsidy scheme will still need financing and the most logical way is to re impose the MPOB Cess that is pegged on the lower price of CPO of RM 1,500. Therefore, at the present price of RM 2,500, we have to pay RM 150 per tonne of palm oil / or RM 30 per tonne of FFB which is applied equally to Peninsula, Sabah and Sarawak.

 It is ironical that MPOA is asking the palm oil industry to start paying the cess at lower threshold price of RM 1,500 instead of the present WPL higher threshold price of RM 2,500!! The Treasury may straight away agree with it and subsequently, may re impose the original MPOBs cess that will pass the burden of the cooking oil subsidy fully to the industry instead of sharing it with the Treasury.

So, MPOA please study the implications of the proposal carefully which seems to relieve the industry from windfall tax but will get a backlash of a higher cess payment at a lower palm oil price. On the other hand, MPOA should focus on the abolition of the rather unjustified cooking oil subsidy scheme itself so that no tax or cess will be collected to finance the subsidy by the industry.

 Palm Trader.

Last Updated ( Monday, 08 June 2009 00:12 )  

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