High export taxes on CPO ineffective: economic observer

Semarang, C Java (Antara News) - The government`s policy of imposing progressive export taxes on crude palm oil (CPO) in an effort to keep cooking oil prices under control is not effective because CPO prices in the world market are high due to external factors, an economic observer said here on Monday.

Prof. Fx. Soegianto, an economist at Diponegoro University, said the government should reallocate a certain percentage of the country`s CPO output to the domestic market in order to keep the cooking oil price under control instead of raising CPO export taxes.

He said the export tax increase was intended to reduce exports but in reality CPO exports had increased.

"Export taxes on CPO have been increased but CPO exports remain high. This happened because the high dollar exchange rate also had an effect on CPO prices," he added.

Sugianto said that although the export taxes were set at a higher level, exporters continued to gain profit in the world market because of the high exchange rate of the US dollar.

The government last week imposed a progressive tax in the range of 0-10 percent on CPO exports effective September 1.

"Until now, we have been adopting a new policy (on CPO exports) once every three months. In the future, there will only be a single policy. We will finalize the policy which will take effect September 1," Director General of Plantations Ahmad Manggabarani said ahead of a Bali meeting to decide the range of the increase in the percentage of taxes on CPO exports last Wednesday.

"Malaysia has already adopted such a policy. If the CPO price increases by a certain amount, the export tax will rise by a certain amount too by referring to the table. Given the instrument, there will no longer be a change in the policy," he said.

The progressive tax would be applicable to the export of CPO and its by-products, he said adding the government wanted to discourage the export of oil-palm kernel so that it could be processed at home.(*)
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