Indonesian Tax News

RI strongly protests France’€™s palm oil tax plan

Trade dispute: Indonesia Oil Palm Estate Fund ( BPDP ) president director Bayu Krisnamurthi ( center ) talks to Indonesian Palm Oil Board ( DMSI ) chairman Derom Bangun ( left ) and Indonesian Palm Oil Producers Association ( GAPKI ) secretary-general Togar Sitanggang after a meeting in Jakarta on Tuesday. The meeting discussed a French bill that will impose a high import tax on palm oil products.( JP/DON )

Indonesia has strongly protested France’€™s plan to issue a biodiversity law that will triple import taxes on palm oil products, one of the country’€™s main export commodities.

The Office of the Coordinating Maritime Affairs Minister said that the proposed law was rife with protectionism, although the French senate has claimed that environmental protection was the reason for the law.

‘€œThis doesn’€™t have anything to do with the ecosystem as it will be imposed on both crude and processed palm oil products, including Indonesian Sustainable Palm Oil [ISPO] products,’€ assistant coordinating maritime affairs minister Arif Havas Oegroseno said in Jakarta on Monday.

If approved this March 15, the draft will oblige exporters to pay as much as 300 euro ( US$327 ) for each metric ton in 2017, 500 euro in 2018, 700 euro in 2019 and 900 euro in 2020. At present, Indonesia is required to pay an import duty of only 103 euro per metric ton.

‘€œThe proceeds from this tax will go into [their] social security fund. In other words, Indonesian farmers will finance French social security,’€ he said.

Indonesia is the biggest palm oil producer in the world, exporting 4.6 million tons of crude and processed palm oil last year to Europe, including France.

With skyrocketing taxes, farmers will suffer the most as they have to push down the selling prices, making them unable to practice costly sustainable practices.

According to France’€™s senate, the bill has been proposed to address several environmental concerns: to help tackle deforestation caused by palm oil plantations, to stop the use of unhealthy pesticide paraquat and to diminish health risks, such as heart attack and Alzheimer’€™s, stemming from palm oil consumption.

Havas said that the reasons were not based on facts, given the current practices and policies. According to him, the Indonesian government has made serious efforts to deal with environmental problems.

Last year, the Indonesian government released the ninth edition of its forest-clearance moratorium map, adding another 71,099 hectares. The extra land brings the total area covered by the current moratorium to 65.08 million ha, after the ministry added concessions for permits that had been revoked following the recent forest fires. According to a Global Forest Watch study that he cited, only 10 percent of the 2015 fires came from palm oil areas.

The moratorium was implemented to stem the rapid land-use transformation in Indonesia. Currently, the country has 8 million hectares of oil palm plantations. Europe, meanwhile, has at least 11 million hectares of land cleared for sunflower and rapeseed plantations, he said.

The bill also violated the World Trade Organization’€™s General Agreement on Tariff and Tax principles that obliges countries to impose similar taxes for similar products, such as sunflower and rapeseed oils, he said.

The ministry has been in contact with the French Embassy to receive clarification from the French government.

The Indonesian Palm Oil Producers Association ( GAPKI ) voiced similar concerns with the ministry and said ‘€œWe’€™ll continue lobbying the French government,’€ secretary general Togar Sitanggang said.

In 2012, a similar bill called the ‘€œNutella tax’€ was proposed in France that would have imposed high taxes on palm oil imports. However, the bill was rejected in 2013. ( rbk )

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