The Star Online (21/09/2021) - PETALING JAYA: A revision in the threshold price for the crude palm oil (CPO) windfall profit tax (WPT) structure is highly unlikely, given the government’s plan to further increase its tax revenue amid the Covid-19 pandemic environment, say industry observers.
Since its last revision in 2009, attempts by planters to seek for a reassessment in the CPO WPT have failed so far. According to Kenanga Research, local plantation companies are now hopeful to a certain degree that the government would reassess the current tax structure with a potentially higher threshold price for WPT.
This is based on the research house’s engagement session with Malaysia Palm Oil Association (MPOA) chief executive officer Datuk Nageeb Wahab recently.
At present, once the CPO price reaches the threshold of RM2,500 per tonne or above, Peninsula-based oil palm plantation companies would be imposed a 15% WPT. For Sabah and Sarawak oil palm planters, a 7.5% WPT would be imposed should the CPO price hit the RM3,000-per-tonne level or above.
Nageeb when contacted by StarBiz said MPOA is proposing for a higher threshold price at RM3,500 per tonne for the CPO WPT from the current RM2,500 per tonne imposed on planters.
Given the tight supply situation and worker shortage amid the lockdowns due to the Covid-19 outbreak, he added that the average CPO price had soared to RM4,100 per tonne in the first eight months of the year compared with the average price of RM2,685 per tonne in 2020.
Kenanga Research in its latest report said, “Our base case assumes there will be no changes to the windfall tax structure and threshold.”
In its scenario analysis, every 1% increase in the windfall tax in 2021 at an estimated CPO price of RM3,700 and RM3,200 per tonne for 2022 will impact the earnings of planters under its coverage by about 1.3% to 13.1% for financial year 2021 (FY21) to FY22, and around 0.3% to 6.1% for FY22-FY23, respectively.
Notably, Kenanga Research said the planters to be the most affected were FGV Holdings Bhd, Hap Seng Plantations Holdings Bhd, Ta Ann Holdings Bhd and United Malacca Bhd, which coincided with their higher production concentration in Malaysia.
The research house is maintaining a “neutral” call on the plantation sector with an unchanged CPO price forecast of RM3,700 per tonne for FY21 and RM3,200 per tonne for FY22, respectively.
It stated that headwinds such as CPO price volatility and environmental, social and governance (ESG) concerns would continue to weigh on the sector.
“However, the valuations of planters under our coverage have already priced in the bulk of the negative factors.
“Integrated players such as Kuala Lumpur Kepong Bhd