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Indonesia plans to slash export taxes on palm oil this month, leaving the market uncertain

Jun 29, 2021

Indonesia's finance ministry said the maximum export levy would be lowered to $175 a tonne when crude palm oil prices exceeded $1,000 a tonne, down from $255 previously. When crude palm oil prices reach at least $750 / ton, a special export tax of $50 / ton is levied; For every $50 / ton increase in crude palm oil, the special export tax will increase by $20 / ton.

Indonesia's decision to change the tax structure for palm oil exports is expected to boost exporters' profit margins, although other groups say frequent rule changes are hurting demand, the Indonesian Palm Oil Association (Gapki) said, according to media reports. Joko Supriyono, chairman of Gapki, said lower taxes were expected to give companies room to invest or increase capacity to absorb the extra workers. This matters when the government wants the economy to recover faster.

However, other groups said frequent changes in the tax structure created uncertainty for the industry. Gulat Manurung, chairman of Apkasindo, a small farmers' group, said the changes could lead to buyers taking a wait-and-see attitude and lower demand for Indonesian palm oil, adding that palm fruit prices had been affected.

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At the same time, Sahat Sinaga, executive director of the Indonesian Vegetable Oil Industry Association (GIMNI), said frequent changes in tax rules made it difficult for traders to calculate the price and risk of palm oil contracts. Global markets do not like changing policies, and rules should be maintained for at least a year.

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