Beruas MP Ngeh Koo Ham said the collection of the windfall profit levy and prosperity tax should be stopped immediately given that the 2008 order for both have expired.
He pointed out that rising costs, too, have dismantled the windfall profits that the producers had enjoyed earlier.
Citing a recent article by an analyst, Ngeh noted that apart from the windfall levy, the government also imposes a corporate income tax, prosperity tax, cess payment, sales tax and an export levy on palm oil producing companies, raising their total tax rate to as high as 54% of profits.
He said that even if the 2008 levy order was still in force, it would no longer be valid given that a 2009 amendment had made it discriminatory, and therefore unconstitutional.
The 2009 Amendment Order No 2 exempted oil palm holdings in a group settlement area under Land (Group Settlement Areas) Act 1960 from the windfall profit levy as it was considered discriminatory.
Windfall profits refer to extraordinary gains in income while windfall tax is applied to companies that generate a significant increase in their earnings due to circumstances or events for which they are not responsible.
“The government should only impose a corporate income tax of 25% of profit on oil palm plantation companies like it does on other businesses,” Ngeh added.
He also pointed out that even if the 2008 levy order was valid, the government should not continue to impose the levy on the oil palm industry as the companies no longer enjoyed extraordinary profits following the drop in crude palm oil (CPO) prices and rising operational costs.
The windfall levy on fresh fruit bunches (FFB) is imposed when the CPO price exceeds RM3,000 per metric tonne, but now the cost of production for each metric tonne of CPO is also about RM3,000.
Production costs have been steadily rising recently due to the lack of plantation workers and increasing cost of fertilisers and weedicides.
In Budget 2022, the government revised the windfall tax for local palm oil producers to a standard 3% levy when CPO prices exceed RM3,000 per tonne in Peninsular Malaysia and surpass RM3,500 per tonne in Sabah and Sarawak.
This was a revision from previous rates of 3% levy once CPO hit RM2,500 per tonne and above for peninsula-based planters, while planters in Sabah and Sarawak were liable to a 1.5% levy when CPO prices hit RM3,000 per tonne and above.