International Finance

Malaysia to review proposed cut in palm oil export tax, says minister

IFM_Malaysia Palm oil export tax
The Finance Ministry has been requested to reduce the tax from 8% to 4%-6%.

Malaysia’s Commodities Minister on May 20 said that it is still evaluating the feasibility of a temporary reduction in a crude palm oil export tax after Indonesia lifted an export embargo that had recently rolled the market.

After Russia’s invasion of Ukraine several sunflower oil shipments had got disrupted and on top of that Indonesia’s prohibition on palm oil exports had further constrained global supplies. Malaysia, the world’s second-largest palm oil producer, is trying to increase its share of the edible oil market.

In order to assure the local supply of cooking oil, top producer Indonesia said it would withdraw the embargo on May 23 and instead apply a domestic market sales requirement.

In a conversation with Reuters, Minister Zuraida Kamaruddin stated that she has requested the Finance Ministry, which has set up a committee to look into the details, that tax be reduced to 4%-6% from the current 8%.

She stated that they are anticipating that the Malaysian exporters would be clear winners in the short term because the worldwide purchasers will source for Malaysian palm oil.

She further added that the ministry will continue to loosely monitor the situation of Indonesia’s policy changes.

Lastly, she added that because of an impending increase in production, crude palm oil prices are expected to reduce, but prices will remain high until mid-2023 due to restricted global supply and Chinese demand.

On the other hand, a key palm oil exporter, China has assured that it will soon be increasing its demand for palm oil later in 2022 as it will gradually open its economy once the pandemic gets subdued.

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