ABSTRACT:
The government of Indonesia imposed export tax on crude palm oil (CPO) and its derivatives since September 1994 and in September 2007, the progressive export tax was implemented. This policy has two objectives, first is to guarantee the availability of domestic CPO as the main raw material of cooking oil which is one of the staple products of Indonesia. Secondly, is to develop the downstream industry of the palm oil industry which has higher value-added compared to CPO. By limiting CPO export, hopefully the CPO will be utilised to produce higher value-added product. The objective of this article is to analyse the effect of export tax on Indonesian palm oil industry. The results indicate that export tax will decrease domestic CPO price, production, export and competitiveness. The policy will make producers worse off while consumers and cooking oil producers will be better off. On the other hand, the policy is able to increase the refined palm oil export and stabilise the cooking oil price.
Keywords: export tax, crude palm oil, Indonesian palm oil industry
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