KUALA LUMPUR: Oil palm planters have recently appealed to the government to raise the threshold level of windfall tax as the industry face increasing costs of doing business.
"Planters are facing an increasingly tough time with costlier production. There’s acute labour shortage and minimum wages is rising rapidly," said Malaysian Palm Oil Association (MPOA) newly-appointed chief executive officer Datuk Mohamad Nageeb Ahmad Abdul Wahab.
In an exclusive interview with NST Business on oil palm planters aspirations for the upcoming Budget 2018, he noted MPOA renewed its appeal to the Plantation Industries and Commodities Ministry to adjust the Windfall Profit Levy thresholds, to better reflect business conditions.
Nageeb said since the implementation of Minimum Wages Order 2012 that took effect from January 2013, the rates have rapidly climbed to RM1,000 in Peninsular Malaysia, and RM920 for Sabah, Sarawak and Labuan.
Two weeks ago, Human Resources Minister Datuk Seri Dr Richard Riot Jaem said minimum wages are set to go up further from 1st January 2018.
Nageeb, who was formerly Sime Darby Plantation Sdn Bhd’s head of upstream, succeeded Datuk Dr Makhdzir Mardan whose contract has expired.
"MPOA is proposing the threshold level for Windfall Profit Levy in Peninsular Malaysia to be raised to RM3,000 per tonne. As for planters in Sabah and Sarawak, we suggest the new threshold level to be RM3,500 per tonne," he said.
Currently, Nageeb said oil palm planters in Peninsular Malaysia pay a windfall levy of 15 per cent on the margin of palm oil pricing above RM2,500 per tonne in the cash market.
Planters in Sabah and Sarawak, however, pay this levy at a lower rate of 7.5 per cent on the margin if the price crosses RM3,000 per tonne.
On top of the windfall tax, oil palm planters also have to pay a 24 per cent corporate tax, and cess amounting to RM13 per tonne of crude palm oil, as well as a 7.5 per cent and 5.0 per cent sales tax in Sabah and Sarawak, respectively.
When compared to businesses in other sectors that just pay 24 per cent of corporate tax, it is obvious that oil palm planters are the most heavily taxed in the country.
Oil palm planting is a capital-intensive activity.
Every year, planters have to chop down old and unproductive trees and replace them with higher yielding seedlings.
Planters, particularly smallholders, need to re-invest their profits to raise productivity at their fields.
Nageeb also took pains to highlight in the global export market, palm oil is already the world's most heavily-taxed vegetable oil, with varying duties imposed by countries that buy palm oil.