Indonesia Palm Oil Export Tax Structure 2013

Export tax structure of Indonesia palm oil over competition from Malaysia, Indonesia cut the maximum duty on refined, bleached and deodorized, or RBD, palm oil to 10 percent from 23 percent last year. The rate for RBD palm olein was cut to 13 percent from 25 percent, while the highest tax for crude oil was set at 22.5 percent. The tax on crude palm oil is 9 percent this month.

Palm oil has tumbled 25 percent this year, set for a second straight annual loss, after stockpiles surged in Indonesia and Malaysia. The contract for February delivery lost as much as 1.1 percent to 2,367 ringgit a ton on the Malaysia Derivatives Exchange today, the lowest price since Nov. 14.

“We will decide soon to provide certainty in 2013,” Agriculture Minister Suswono told reporters at an industry conference in Bali, Indonesia today. The tax changes will be aimed at reducing stockpiles that are near Indonesia’s maximum storage capacity, he said.

Malaysia, the second-largest producer, will cut the tax on exports of the crude variety and abolish a duty-free shipments quota from Jan. 1, moves that will increase competition with Indonesia. The changes were announced on Oct. 12 after inventories in Malaysia surged to a record and futures slumped to a three-year low. Indonesia last year lowered its taxes, making local crude palm oil cheaper than in Malaysia, cutting costs for refiners.

“We want the taxes to be similar if not exactly the same as Malaysia,” Joko Supriyono, secretary-general of the Indonesian Palm Oil Association, said in an interview. Duties could range between 3 percent to a maximum 8 percent, he said. The association has submitted a proposal to the Finance Ministry regarding the tax structure, he said.

Malaysia’s new tax rates will range from 4.5 percent to 8.5 percent, rising as prices climb from 2,250 ringgit ($738) a ton to 3,600 ringgit. The existing levy is 23 percent.

Indonesia, the world’s biggest producer of palm oil, is set to surpass India as the largest user next year as economic growth boosts demand.

Consumption may climb 13 percent to 8.5 million metric tons from 7.5 million tons this year, Indonesia’s Deputy Trade Minister Bayu Krisnamurthi said by text message. That exceeds U.S. government estimates of 7.95 million tons for India and 7.87 million tons for Indonesia in the 2012-2013 year.

Rising demand for palm used in everything from instant noodles and candy to fuel may curb exports that rose 2.9 percent in October from a month earlier. The economy grew at more than 6 percent in the past eight quarters as President Susilo Bambang Yudhoyono raised spending, luring investors such as Unilever (UNA) and L’Oreal SA. Palm use jumped 51 percent in the past four years as wheat climbed about 21 percent and sugar rose 15 percent, U.S. Department of Agriculture estimates show.

“We’ve seen very strong demand growth from Indonesia,” said Erin Fitzpatrick, a London-based analyst at Rabobank International. “You certainly can see that story continuing,” she said by phone Nov. 27.

The country may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating $1.8 trillion in sales for agriculture, consumer and energy companies by that year, McKinsey & Co. said in September. McKinsey estimates consumer spending in urban areas will rise 7.7 percent a year to $1.1 trillion by 2030, according to the report.

Palm-oil refining capacity may climb to more than 30 million tons next year, exceeding output, as companies step up investments following tax changes, Andreas Bokkenheuser, a Singapore-based analyst at UBS AG said last month. Investors are planning $1 billion of investments following the duty reduction, Sinaga said then.