Sales tax may pressure planters' competitiveness
The tax will increase raw material costs, although some of the additional cost may be passed on to buyers, says CIMB Research.
Major listed plantation companies with palm oil operations in Malaysia include SD Guthrie Bhd , FGV Holdings Bhd , Kuala Lumpur Kepong Bhd , IOI Corp Bhd and Wilmar International Ltd.
'Overall, we are slightly negative on the indicative 5% sales tax on crude palm kernel oil for Malaysian palm oil players, although the industry may seek a government waiver if the tax undermines local competitiveness against Indonesia,' said CIMB Research in a report yesterday.
The research house said it understands from the Malaysian Palm Oil Association and planters that fresh fruit bunches (FFB) will be exempted from the 5% sales tax, despite being listed among taxable goods.
'This is because the sales tax applies only to the manufacturing sector, and FFB is classified as a locally harvested raw material intended for further processing rather than a manufactured product,' CIMB Research said.
However, palm kernel oil, refined, bleached and deodorised palm kernel oil and palm kernel shell have been reclassified from tax-exempt goods to those subject to a 5% sales tax under the Sales Tax Order 2025.
It remains unclear whether the industry will seek exemptions for these products, added the research house.
Meanwhile, CIMB Research said the US Environmental Protection Agency's (EPA) proposal for 5.61 billion gallons of biodiesel under a mandate for next year is supportive of demand for edible oil and crude palm oil (CPO) prices, as the mandate will help sustain US consumption of edible oils.
'We maintain our CPO price forecast of RM4,200 per tonne for this year and reiterate our sector top picks, IOI and Hap Seng Plantations Holdings Bhd ,' said the research house.
For next year, the EPA has set a target of 7.12 billion biomass-based diesel renewable identification numbers (RINs), which is expected to translate into 5.61 billion gallons of actual biodiesel blended that year.
'This target is expressed in RINs, in line with the EPA's broader objective to limit the number of RINs generated from imported biofuels,' CIMB Research said.
As a result, the EPA now projects that each gallon of biomass-based diesel will generate 1.27 RINs in 2026 and 1.28 RINs in 2027, down from the previous estimate of 1.6 RINs.
In comparison, the 2025 biomass-based diesel volume mandate stood at just 3.35 billion gallons, a level widely criticised by the industry as inadequate.
Notably, the 2026 blending target of 5.61 billion gallons for biomass-based diesel volume exceeds the 5.25 billion gallons requested by the industry.
'We are positive on the proposed 2026 mandate, as fulfilling the 5.61 billion gallons or 19.2 million tonnes of biodiesel would support the use of edible oils as feedstock to meet the US biodiesel requirement. For context, US biodiesel production last year stood at around 16 million tonnes.'
The final rule for the Renewable Fuel Standard (RFS) targets in the United States is expected to be published by the end of this year.
Under the RFS, oil refiners are required to either blend substantial volumes of biofuels into the US fuel supply or purchase compliance credits known as RINs from others who exceed their blending obligations.
Small refiners may apply for exemptions if they can demonstrate that complying with the mandate would cause undue economic hardship. The proposal reflects a significant shift in biomass-based diesel requirements, noted CIMB Research.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
3 hours ago
- The Star
PTPTN allocates RM47.8mil in advance loans for July 2025 intake
KUALA LUMPUR: The National Higher Education Fund Corporation (PTPTN) has allocated RM47.8mil in Loan Advance Payment (WPP) to 31,850 students pursuing diploma studies at public universities and polytechnics for the July 2025 intake. In a statement on Wednesday (July 2), PTPTN said each eligible student will receive RM1,500 to assist with initial preparation costs, ensuring their welfare is safeguarded as they begin their higher education. WPP is offered to Malaysian students who consented to receive the advance loan during their application to public higher education institutions (IPTA) via UPUOnline or the official admission portals, and whose parents or guardians are recipients of the government's Sumbangan Tunai Rahmah (STR) aid, subject to eligibility criteria. Since its introduction in 1999, WPP has benefited 990,638 students with total disbursements amounting to RM1.46bil as of May 31 this year. As an agency under the Higher Education Ministry (MOHE), PTPTN said it remains committed to supporting students in gaining access to tertiary education. Students can check their WPP offer through the myPTPTN app and redeem the funds at any Bank Islam Malaysia Bhd (BIMB) branch nationwide from today until Sept 1, by presenting their WPP offer letter and MyKad, although representatives are not allowed. PTPTN chairperson Datuk Seri Norliza Abdul Rahim led a delegation to personally visit WPP recipients in Bukit Gelugor, Penang, where a total of 1,419 students were offered assistance mounting to RM2.13mil. Norliza advised students to use the funds responsibly and encouraged them to apply for full PTPTN loans according to their institution's application timeline to ensure timely processing and approval. Applicants are also required to open a National Education Savings Scheme (Simpan SSPN) account via the app before submitting their PTPTN loan applications. - Bernama
Focus Malaysia
3 hours ago
- Focus Malaysia
Coherent SST reform requires zero exemptions for policymakers
THE Malaysian government's recent changes to the Sales and Service Tax (SST) are true to an at least decade-old tradition of self-defeating consumption tax policies. Raising taxes is a thankless but necessary task that requires astute policy design and nuanced messaging to manage both economic and political narratives. Both the 1 July changes and the case for them have left policymakers open to justifiable but needless criticism. Malaysian policymakers have long recognised the need to significantly increase revenue collections but have struggled to convince Malaysians. Tax reforms repeatedly adopt a narrow, small-target strategy that—by lacking both vision and tangible economic sustainability and equity objectives—instead become lightning rods for critics. Malaysians worried about their household budgets naturally fear higher taxes and do not count fiscal sustainability among their chief concerns. Making the case for consumption tax reform needs and deserves better than pointing to unsustainable budget deficits and delivering patronising rebukes of SST critics. It requires a consistent, coherent and non-condescending narrative that garners public support for changes that will improve not threaten their livelihoods. Policymakers should be explaining the importance of taxing consumption, how it supports a tax strategy that balances fairness, competitiveness and sustainably, and how the money raised will be used to benefit Malaysians. Consumption taxes have advantages that are especially relevant to Malaysia's circumstances. Malaysia has a large visiting and undocumented population whose income cannot be taxed but whose consumption can be. It has a sizeable informal sector contributing around a quarter of gross domestic product, whose income likewise escapes direct taxes but whose inputs may be partially captured by consumption levies. Shaping consumption choices through price signals will be essential to making Malaysia's future economic development less carbon intensive and more sustainable. Consumption taxes progressed alone cannot address Malaysia's revenue needs or be implemented equitably. Consumption taxes are regressive as low-income households consume more of their disposable incomes and therefore experience a greater relative impact. Attempts to neutralise these impacts by exempting or setting to zero the rate for basic goods introduces complexity for businesses and consumers, exempts rich and non-Malaysian consumers at the same time, and opens policymakers to arguments of inconsistency or bias. Accompanying changes to income taxes, transfers or welfare for low-income households would be a superior approach. Malaysians would be more receptive to tax hikes if their purpose were more tangibly linked to spending for their benefit. Public wariness remains high in the shadow of 1MDB and other newsworthy examples of funds being misused, with the government's fiscal challenges explicitly associated with corruption. At the same time Malaysians want better schools and hospitals, greater access to safe and efficient transport and technology, more generous social welfare and more. Transparent and well communicated spending intentions are an essential enabler of tax reform. The SST reforms have thus far been mapped poorly in these regards. Far from presenting a coherent vision for equitably, efficiently and sustainably raising revenue to spend in the interests of Malaysians, the reforms adopt a piecemeal and discriminatory approach to taxation. Two particularly concerning elements that have attracted fair criticism are the inclusion of basic goods and differential rates for local and imported goods. Malaysia is a net importer of food including many staple products, with openness to trade a critical contributor to food security both at the household and national levels. SST increases that represent an implicit import tariff, especially on basic and healthy goods like fruit, send precisely the wrong signal at a time when Malaysia is trying to counter global economic policy uncertainty. Malaysia must reinforce its openness to trade and investment by avoiding discriminatory taxes on overseas goods. Bowing to public backlash to provide post-announcement tax exemptions for imported apples and oranges (among other changes) further illustrates the policy development and communication shortcomings. Policymakers were either unaware of or misread public sensitivity on the price and availability of basic food imports, and in the absence of a compelling defence for the proposed SST increase were forced to make concessions. Evident is both a need for wider consultation and that complex and subjective tax design leaves policymakers exposed. Making the case for tax reform in Malaysia should also stick to message not mechanism. Long-running arguments comparing the SST with a restored GST are of greater distraction than consequence to the current debate. Either mechanism can be tailored to achieve comparable coverage and revenue outcomes, and tax incidence (who ultimately pays: consumers or producers) is determined by markets not tax design. Differences in administrative efficiency and effectiveness are important considerations that are adaptable to a consumption tax with either (or any) name. What Malaysia needs from policymakers is greater tax policy reform coherence, communication and ambition. And the leadership to design and deliver tax strategies and mechanisms that benefit Malaysia and Malaysians. ‒ July 2, 2025 Dr Stewart Nixon is the deputy director of research at the Institute for Democracy and Economic Affairs (IDEAS). The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia. Main image: Bigstock
The Star
3 hours ago
- The Star
PM Anwar meets with Italian industry leaders on his second day in Europe
ROME: Datuk Seri Anwar Ibrahim began his second working day in Italy with one-on-one business discussions with top leaders from strategic sectors such as defence and energy. The meetings with Fincantieri and Leonardo, two major Italian defence firms that participated in the recent Langkawi International Maritime and Aerospace Exhibition (LIMA), have opened doors to long-term ventures. "I stressed the importance of a government-to-government approach to strengthen Malaysia's role as a hub in maintenance, repair, and operations," Anwar said on Thursday (July 2). He emphasised that the session was crucial in maintaining Malaysia's position as a stable and reliable investment destination. Anwar met with Fincantieri CEO Pierroberto Folgiero, Leonardo senior marketing and strategic campaign VP Tomasso Pani, and ENI CEO Claudio Descalzi, along with PETRONAS president and Group CEO Tan Sri Tengku Muhammad Taufik Tengku Kamadjaja Aziz. During an interactive session moderated by Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, several Italian company representatives expressed their reasons for investing in Malaysia. One noted that the Asian nation is financially stable and its people are easy to work with. "We have worked with major entities like Abu Dhabi and several cities in China, but Malaysia is almost perfect. It is a hub of the South Pacific region and as a country, developed to a very advanced level," he said. Most participants praised the Malaysian government's efforts in creating a reliable environment for trade.
