These changes indicate some risk that the regulations may be amended further. The structure was changed again in June 2020 when the government raised the levy to USD55/t while removing price thresholds. In December 2018, the government allowed exporters to pay zero levy on CPO at a time when prices were below USD570/t while imposing a maximum of USD50/t if prices improved to above USD619/t. The export tax structure, however, has remained unchanged. The export levies were introduced in 2015 to raise revenue from palm oil exports and Indonesia has tinkered with the structure in the past two years in response to CPO prices. The applicable export tax at the current reference price is USD33/t. In addition to the export levies, Indonesia will continue to impose an export tax on palm oil products, starting at USD3/t when the reference CPO price is over USD750/t and increasing with price thereafter. However, levies on refined products start at a lower rate than CPO and will remain lower. The new system thus represents a significant increase from the current flat levy of USD55/t.Īpart from CPO, export levies on other palm oil products will also be progressively raised. The reference price set for December 2020 is USD871/t, and therefore exporters will have to pay an export levy of USD180/t under the new structure. Thereafter, levies will increase for every USD25/t increase in the reference CPO price, starting with USD5/t for the price band of USD670-695/t, and by USD15/t thereafter. Under the new structure, CPO will attract an export levy of USD55/t until government-determined reference prices are at or below USD670/t. Indonesia will apply progressive export levies on palm oil exports from 10 December 2020. Fitch will also monitor any changes to the export duty structure in Malaysia following Indonesia’s move.
We will update our view in the next few months once clarity emerges on the stability of the latest levy structure and Indonesia’s biodiesel targets. However, we see some risk of a reversion to the present structure based on past changes, and maintain our price assumption and worsening sector outlook in 2021. This will also support crude palm oil (CPO) prices, and the Malaysian benchmark should average higher than our assumption of USD560/tonne (t) in 2021. JAKARTA SAWIT INDONESIA – The revision in Indonesia’s export levy structure should support Indonesia’s biodiesel consumption growth in 2021 by boosting collections to fund the subsidy burden, Fitch Ratings says.