KUALA LUMPUR (Oct 22): The recent announcement to revise the export tax on crude palm oil (CPO) is aimed at enhancing downstream refining operations in Malaysia's palm oil industry, Minister of Plantations and Commodities Datuk Seri Johari Abdul Ghani said.
"The increase in the export tax for crude palm oil is to enhance more downstream [activities], allowing us to create value-added products right here in our country.
"Instead of exporting CPO, we want to process it domestically," Johari told reporters at the Oils and Fats International Congress 2024, an event organised by the Malaysian Oil Scientists and Technologists Association.
During the Budget 2025 presentation last Friday, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim announced plans to raise the ceiling on the CPO export tax structure, effective Nov 1.
Under the proposed changes, the ceiling will increase to 10% for prices exceeding RM4,050 per tonne, with additional brackets of 9.5% (for prices between RM3,900 and RM4,050), 9% (for prices between RM3,751 and RM3,900), 8.5% (for prices between RM3,601 and RM3,750), and 8% (for prices between RM3,451 and RM3,600) are to be introduced.
The current maximum tax rate stands at 8% for prices over RM3,450 per tonne.
Speaking to The Edge at the sidelines of the conference, Malaysian Palm Oil Board (MPOB) director-general Datuk Ahmad Parveez Ghulam Kadir also noted that the revision could benefit the downstream sector by reducing the volume of palm oil exported in its crude form.
"This may indirectly prevent some palm oil from being exported, giving importing countries pause to consider the increased cost. As a result, there is more opportunity for the CPO to remain in Malaysia for downstream refining activities.”
The upward revision of Malaysia's CPO export tax comes just a month after Indonesia, the world’s largest palm oil exporter, reduced its own export levy rates to partly improve competitiveness against rival vegetable oils.
Indonesia abolished export tax rates based on a graduated scale, and put into place a fixed 7.5% export tax rate for CPO.
Prior to this change, Indonesia had imposed a levy of between US$55 (RM233.52)to US$240/tonne for CPO exports, depending on a set of price brackets for the monthly reference price.
This is expected to lower the existing levy in Indonesia — but the rate will still be higher than Malaysia's, experts say.
"The reason Indonesia imposes a very high [CPO] levy and export tax is to encourage local refining and support their planters.
"When export costs rise to over US$200 per tonne, it becomes uneconomical for them to export, so they are forced to use it domestically," Parveez told The Edge.