KATADATA - Indonesian Trade Minister Thomas Trikasih Lembong has sent a letter of protest to the French government over its plans to impose progressive taxation on crude palm oil (CPO) derivative products. According to Lembong, charging progressive taxes is in breach of World Trade Organization (WTO) rules and the 1994 General Agreement on Tariffs and Trade (GATT).
This policy applies to CPO and its derivative products, most of which are imported from Indonesia, but not to other vegetable oils. CPO and its derivative products are in demand because they are low cost. Under this policy, palm oil based products will be more expensive because the French parliament proposes to impose a tax of EUR 300 per ton next year. The tax will then increase by EUR 200 a year, reaching EUR 900 per ton by 2020.
This discriminatory treatment will affect economic, social and political stability, as well as the palm oil market in Europe. "This will lead to price discrimination and will harm Indonesia. I sent a letter to the French government asking them to cancel the plan," said Lembong in an official statement on Friday (2/5).
Under GATT Article III:2, imported products are exempt from internal taxation or other internal charges applied to domestic products. On the other hand, GATT Article XX allows WTO member states to protect the life or health of humans, animals and plants. But its application may not provide a justification for discrimination, or restrictions on international trade.
He said that citing environmental factors as the main reason behind this policy is not justified. Indonesia has adopted a sustainable palm oil policy (Indonesian Sustainable Palm Oil/ISPO) to ensure that palm oil is produced in an environmentally friendly way that does not contribute to deforestation and climate change.
"The French government has the authority do to this, but I have asked them to cancel amendment 367 and to cooperate with Indonesia," said Lembong, referring to the French Law on Biodiversity.
The imposition of progressive tax will affect Indonesian economy. CPO is a strategic commodity in Indonesia. The palm oil industry directly and indirectly employs 16 million workers, and about 61 cities and towns in Indonesia are dependent on the palm oil industry.
CPO and its derivative products contribute significantly to the state revenue. Indonesia's export earnings from these commodities are US$19 billion per year. Its contribution to gross domestic product (GDP) is 1.6 percent. (Read: Ministry of Trade to Revise Two Import Facilitation Regulations)