KUCHING: The Sarawak Oil Palm Plantation Owners Association (Soppoa) is appealing to the state government to review the tax threshold for the State Sales Tax (SST) on Crude Palm Oil (CPO).
It is urging the government to only impose the 2.5 per cent SST per tonne when the CPO price is above RM2,500 per tonne and not to impose any tax when the price drops below RM2,500 per tonne for the next five years.
Soppoa said in a press statement yesterday that the Malaysia Palm Oil Association (MPOA) was also appealing to the state government to review the SST for its Sarawak members.
“The next five years will be critical for the oil palm industry as the plantations reach maturity and reach sustainable yield per hectare.“Soppoa and MPOA hope the state government will take cognizance of this critical period in considering their appeal for a review of the SST,” said Soppoa.
Soppoa had submitted a proposal to the state government in April, while MPOA is believed to have submitted theirs in June. Some 70 per cent of plantation owners in Sarawak are members of Soppoa. Soppoa explained that at present, a five per cent SST is imposed on every metric tonne of CPO produced in Sarawak when the Malaysian Palm Oil Board (MPOB) average price is above RM1,500 per tonne.
The SST is reduced to 2.5 per cent when the CPO price is between RM1,001 and RM1,400, and no tax is levied when the price drops below RM1,000 per metric tonne. With the current CPO price at above RM2,000 per tonne, oil palm plantation owners in the state have to pay more than RM100 SST for every tonne they produced.
Soppoa said the review of the SST was necessary to help plantation owners in the state through the period of low yield and high cost as most of their palm trees have yet to reach full maturity.
It added that although Sarawak has the highest planting rate in Malaysia, the state is a late entrant to the industry and its plantations are the youngest in the country.
At present about 80 per cent of the palm trees in Sarawak have yet to reach full maturity and maximum yield, Soppoa said.
It also revealed that a study carried out by KPMG, a consultant firm engaged by the association, showed that it would take at least five more years for the plantations in the state to reach the level of maturity and yield as those in Peninsular Malaysia. Based on MPOB data, the yield per hectare in Sarawak was 16.22 tonnes last year compared to 19.63 tonnes in Peninsular Malaysia for the same period.
Typically, harvesting of oil palm trees begin only from the fourth year onwards, which meant that for the first three years plantation owners have no source of revenue. The yield increases as the trees mature and plateaus off from the eighth year of planting. MPOB projected that Sarawak planters could only break even when the price is RM1,820 per tonne in 2009 but would incur a loss if the SST was taken into account. However, Soppoa said the average yield per hectare in Sarawak was expected to rise to 20 tonnes in the next five years as more trees mature and planters could expect to break even with CPO price of RM1,500 per tonne based on current production costs.Soppoa also said that Sarawak planters have to incur higher handling costs as the transport infrastructure in the state was less developed compared to Peninsular Malaysia.
Meanwhile, Land Development Minister Dato Sri Dr James Masing when contacted for his reaction to SOPPOA’s call, replied: “It is something that the government should consider seriously given the current financial meltdown.”
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