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PN should use crude palm oil export duty and windfall profit levy to subsidise cooking oil price

Press statement by MP for Seputeh and former Minister of Primary Industries, Teresa Kok in Kuala Lumpur on 14 June 2021:

 

Government is Urged to Use Collection From Crude Palm Oil (CPO) Export Duty and Windfall Profit Levy to Subsidise Cooking Oil Above 2Kg, And Formulate New Policy on Subsidy for Local Cooking Oil

 

The extension of the Movement Control Order (MCO) to control the spread of Covid-19 has resulted in many people losing their incomes resulting in many descending into abject poverty. Their livelihoods became more hard-pressed when the prices of essential items such as cooking oil have ballooned. The hike in cooking oil prices will also increase the cost of production of  food that uses cooking oil.

One of the topics which have been hotly discussed amongst consumers is – the increase of more than RM10 on the price of 5kg cooking oil compared to 2 years ago due to the hike in the price of Crude Palm Oil (CPO) to more than RM4,200 since last month. Malaysian palm oil industry is the industry which contributes most to the government of Malaysia. Besides collecting  taxes at all levels of the industry, the government also imposes RM16 cess for every ton of CPO. On top of that government also collects export duty when CPO price exceed RM2,250 per metric ton and Windfall Profit Levy when the price exceed RM2,500 per metric ton.

 

CPO Export Duty Rate Chart

 
CPO Export Price (FOB RM/ton)Export Duty Rate (%)
<2,250.00NIL
2,250 – 2,4003
2,401 – 2,5504.5
2,551 – 2,7005.0
2,701 – 2,8505.5
2,851 – 3,0006.0
3,000 – 3,1506.5
3,151 – 3,3007.0
3,301 – 3,4507.5
> 3,450.008.0
Source: Malaysian Custom Department
 

Estimated RM1 bilion Export Duty To Be Collected in 2021

 

The CPO price has generally exceed RM3,450 per metric ton this year. This price levels allows the government to impose 8% export duty on CPO exports. Based on the data of CPO export quantity and monthly average prices on the website of MPOB, the total export duty of CPO that can be collected by Malaysian Custom from January to May this year, is about RM564,816,356.  If the CPO prices continues to remain high, then the government will be able to collect more than RM1 billion CPO in export duty for the whole year of 2021.  (The figures are based on the data stated in the Malaysian Custom and MPOB website).

 

CPO Export Duty Collected in January – May 2021

 
 

Estimated RM 1 bilion Windfall Profit Levy To Be Collected For 2021  

 

According to the statement of the Minister of Plantation Industries and Commodities Datuk Khairuddin Aman Razali dated 8 May 2021, the government is expected to collect RM298 million in Windfall Profit Levy for the First Quarter of 2021 (Sinar Harian Online). At the same time, the Director-General of Malaysian Palm Oil Board (MPOB) Dr Ahmad Parveez Ghulam Kadir said the Windfall Profit Levy could reach RM1 bilion this year (BH Online, 2 May 2021).

The estimates show the government can collect about RM2 billion in taxes from CPO Export Duty and from the Windfall Profit Levy from the palm oil industry, for the year ending 2021.

 
MP for Seputeh, Teresa Kok.
 

Locally Produced Cooking Oil Should Be Subsidised by the Government By Using Taxes Collected From Palm Oil Industry

 

The government has been subsidising cooking oil when the RBD Palm Olein was above RM2,300 per metric ton, but the subsidy is only to produce 1 kg poly pack cooking oil but not for 2kg – 5 kg bottled cooking oil.

The 5kg bottled cooking oil price has gone up to RM30 to RM32.70 compare to RM20 to RM23 per bottle during the mid-year of 2019. This increase of price has raised grouses of consumers as it resulted in clear pressures in households.

According to the news report published in BH Online dated 10 June 2021, Minister of Domestic Trade and Consumers’ Affairs (KPDNHEP) said the government has been  subsidising 60,000 metric ton of cooking oil in the form of 60 million poly pack per month to Malaysians, and the amount is enough for 32.7 million of people with the average of 1.7kg per person per month.

It is time for KPDNHEP to review the efficiency of the cooking oil subsidies system (COSS) in the form of 1kg poly pack as the system has resulted in many leakages during distribution and sales, as the poly pack oil don’t reach many Malaysians in the B40 category, but instead it has been used by hawkers and restaurant operators.

It’s also time for the government to formulate a new policy by giving subsidies to cooking oil producers when CPO prices reach RM3,500 per metric ton, so that the government can fix ceiling price for cooking oil as a tool to control inflation.

Malaysia is the second largest palm oil producing country in the world. The palm oil industry has contributed billions of Ringgit  in taxes to the government. As such, the government should use the taxes collected from this industry to subsidise all locally produced cooking oil, especially when CPO prices are high.

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