SANDAKAN: Any review of Sabah’s crude palm oil (CPO) sales tax rate can only be made by the new state government, says Deputy Plantation and Commodities Minister Datuk Chan Foong Hin.
He said while the Federal Government is aware of industry concerns over the 7.5pc sales tax imposed on CPO in Sabah — the highest in the country — taxation on palm oil remains a state matter.
“This is state revenue, not federal. The rate is a state matter and can only be reviewed by the Sabah government,” he said when met at a Malaysia Palm Oil Board event here, Wednesday.
He said this when asked about the higher taxes imposed on Sabah’s palm oil players, adding that while the Federal Government acknowledges industry concerns, the tax rate is a state matter and can only be reviewed by the Sabah government.
Sabah currently charges a 7.5pc sales tax on CPO once prices exceed RM1,500 per tonne, compared to Sarawak’s 5pc. The tax is collected entirely by the state government under its fiscal autonomy and contributes significantly to state revenue.
Chan estimated that Sabah earns between RM800mil and RM1bil annually from the CPO sales tax, describing it as an important component of state finances.
He acknowledged that palm oil producers have voiced concerns about the higher rate, which they say adds pressure on top of rising production costs, labour shortages and logistical constraints unique to Sabah.
“Any decision to revise or adjust the rate has to come from the new state government,” he said, adding that the Federal Government continues to engage with industry stakeholders on issues of cost and competitiveness.
Apart from the state-imposed CPO tax, producers in Sabah also face federal-level charges. These include a 3pc Windfall Profit Levy, triggered when palm oil prices in Sabah and Sarawak exceed RM3,500 per tonne, and a RM16-per-tonne MPOB cess on crude palm oil and crude palm kernel oil for industry regulation and development.
Industry observers say the combined effect of the state sales tax, windfall levy and MPOB cess places Sabah planters at a disadvantage compared with their counterparts in Peninsular Malaysia and Sarawak, where cost structures are lower and infrastructure is more developed.
They say the burden is compounded by increases in fertiliser, transport, labour and compliance costs, which have risen sharply in recent years.
Industry observers add that while these taxes help fund research, development and public infrastructure, they also contribute to higher operational costs and reduced margins for independent planters — particularly smaller producers struggling with ageing plantations and limited access to financing.
Sabah, the country’s second-largest palm oil producing state, accounts for roughly a quarter of Malaysia’s total planted area. Stakeholders have urged both state and federal authorities to find a balance between maintaining public revenue and ensuring the long-term sustainability of the industry.
