25/09/2007 (AFX News Limited), JAKARTA - The Indonesian government removed the 10 percent value-added tax on non-branded cooking oil Monday, an official said.
Coordinating Minister for Economic Affairs Budiono said the government is hoping the move will help push down the price of cooking oil.
Non-branded cooking oil is used mostly by low-income families.
Budiono said the government will also spend 25 billion rupiah on a 2,500-rupiah-per-liter subsidy for non-branded cooking oil.
The removal of VAT on non-branded cooking oil will reduce the government's revenue by some 300 billion rupiah this year.
The cooking oil price has gone up over the past few years in line with the increase in crude palm oil (CPO) prices in the global market. CPO is the raw material for cooking oil.
In a previous effort to stabilize cooking oil prices, early this month the government increased the tax on CPO exports to a maximum of 10 percent under a progressive tax regime from a fixed rate of 6.5 percent.
CPO exports are now taxed at a rate of 10 percent if the price is 850 US dollars per ton or more, 7.5 percent if the price is 750-849 dollars, 5 percent if the price is 650-749 dollars and 2.5 percent if the price is 550-649 dollars. No tax is levied if the price is less than 550 dollars per ton.
The government also hiked the rate of tax on exports of palm fruit and palm kernel to 40 percent from 10 percent.
The country's CPO consumption is estimated at around 3.8-4.0 million tons in 2007, or about 22 percent of output.
(1 US dollar = 9,137 rupiah)