The study aims at examining the impact of tax imposition on the cost competitiveness of the Malaysian palm oil industry, using gross profit margin analysis. Secondary data were used in this study and gross margin analysis was undertaken to identify the relationship between cost and revenue for each commodity, namely, oil palm, rubber and cocoa. Gross profit (GP) is the difference between total revenue (TR) and total operating cost (total cost of production). To calculate gross profit margin (GPM), GP is multiplied by 100 and divided by TR (GP/ TR x 100). GPM with and without tax were calculated and compared for each commodity. In the calculation of GPM, the average price in 2013 and the average price over seven years (2007-2013) for the three commodities were used. Based on the average price in 2013, it was found that GPM with tax for rubber was the highest at 48.93% compared with oil palm (45.91%) and cocoa (7.79%). For oil palm, if the crude palm oil (CPO) price were less than or equal to RM 2500/t, an increase in CPO price will increase GPM, and the difference between GPM with and without tax becomes lower. However, if CPO price were greater than RM 2500/t (when the windfall profit levy will be imposed on oil palm plantations), an increase in CPO price will increase GPM, but the difference between GPM with and without tax becomes higher. This means that the windfall profit levy gives a higher impact to the oil palm plantation than cess and sales tax.
Keywords: cost competitiveness, gross profit margin analysis, oil palm plantation, tax