New Export Tax System for Indonesia’s Palm Oil Industry
After introducing palm oil export levies earlier this month, the Indonesian Finance Ministry announced on Tuesday (28/07) that it has implemented another change in the country’s palm oil industry. From now on, export taxes for crude palm oil (CPO) and other palm oil products will be expressed in US dollar instead of a percentage of the price. Indonesia’s palm oil export tax kicks in when the government’s reference CPO price exceeds USD $750 per metric ton. If the price is below this level, palm oil exporters only need to pay the new export levies.
The government decided to change the palm oil tax structure in order to make it simpler. Previously, palm oil exports were subject to a tax ranging between 7.5 percent and 22.5 percent depending on the government’s reference price. If the price was below USD $750 per ton, then the tax rate would drop to 0 percent in a bid to boost palm oil demand. However, since September 2014, the reference CPO price has been below USD $750 per ton, implying that the 0 percent export tax kicked in the following month. As the price has not rebounded, the Indonesian government failed to generate tax income through palm oil exports and therefore it introduced the palm oil export levies earlier this month.
When the export tax is zero, new rules require that a USD $50 per metric ton levy is imposed on CPO exports, and a USD $30 per metric ton levy is imposed on exports of processed palm oil products. Initially the government said that these export levies will not need to be paid when the price exceeds USD $750 per ton (and the regular export tax kicks in). Now, however, the Indonesian Finance Ministry said that the export levies need to be paid whatever the palm oil price is. As such, when the reference price is above USD $750 per ton, then palm oil exporters need to pay both the export levy and export tax.
Palm Oil Export Tax System Indonesia:
| Price Range | New System USD per ton |
Old System % of price |
| < $750 | 0 | 0 |
| $750 - $800 | 3 | 7.5 |
| $800 - $850 | 18 | 9 |
| $850 - $900 | 33 | 10.5 |
| $900 - $950 | 52 | 12 |
| $950 - $1,000 | 74 | 13.5 |
| $1,000 - $1,050 | 93 | 15 |
| $1,050 - $1,100 | 116 | 16.5 |
| $1,100 - $1,150 | 144 | 18 |
| $1,150 - $1,200 | 166 | 19.5 |
| $1,200 - $1,250 | 183 | 21 |
| > $1,250 | 200 | 22.5 |
Source: Indonesian Finance Ministry
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RE PALM OIL EXPORT TAX SYSTEM
IF EXPORT PRICE IS USD 905.00 LESS TAXES ARE USD52.00 + USD50 LEVIES EQUALS USD803.00 EXPORTES GETS
IF EXPORTER SELLS AT USD895.00 LESS TAXES ARE USD33.00 + USD50.00 LEVIES EQUALS USD812.00
HOW DOES THIS WORK??? IT SEEMS EXPORTER IS BETTER OF SELLING AT 895.00 INSTEAD OF 905.00