Rethinking taxation in the palm oil industry
RECENTLY, a bright-eyed Gen Y economics student asked me, 'Uncle, what's the oil palm industry really like?'
I chuckled and replied, 'It's profitable enough to be taxed, quiet enough to be overlooked, and burdened enough to be running on fumes.'
Then I added with a grin: 'Imagine a golden goose that still lays eggs – but now wears a necktie made of red tape and is expected to run a marathon.'
If you truly want to test a Malaysian oil palm grower's patience, just whisper one word: Taxation.
What usually follows is a monologue hotter than the midday sun blazing over an immature estate – and with good reason.
Once hailed as Malaysia's 'green gold', palm oil today feels more like a bottomless ATM, tapped at will.
From plantation to port, nearly every step in the value chain is met with a levy of some kind. It's like a relentless game of 'catch and cash', with federal, state, and even local authorities taking turns dipping their ladles into the same pot.
Taxation has become a pressure point that refuses to ease. What was once a proud, productive and globally competitive industry now risks being reduced to a fiscal crutch, rather than recognised as a strategic national asset.
Methods matter
No one disputes the government's need for revenue. But how we raise it matters.
From estate to export terminal, the palm oil value chain is saddled with a complex web of taxes, levies, and cesses: windfall profit levy, export duties, cess contributions, and state sales taxes in Sabah and Sarawak, just to name a few.
Now, the industry faces a new challenge – the proposed expansion of the sales and service tax (SST), due to take effect on July 1.
Details remain vague. Communication has been patchy. And the implementation timeline feels rushed.
This new tax regime isn't landing in a vacuum. The upstream sector is already grappling with deep-rooted structural challenges: ageing palms, delayed replanting, rising operational costs, low mechanisation and persistent labour shortages.
High input prices and erratic weather patterns compound these pressures. And yet, in this already strained environment, more taxes are expected – many of them on gross revenue, not net profit.
This means that levies are paid even when a company is bleeding or barely breaking even.
According to the Malaysian Estate Owners' Association's latest report, the industry paid an estimated RM11.5bil in taxes last year alone – nearly 32% of total profitability. At this point, it's no longer just taxation.
It's starting to feel like strangulation.
To be clear, palm oil remains a cornerstone of the Malaysian economy. It contributes to food security, sustains rural livelihoods, generates foreign exchange, and helps fund public services.
Between 2020 and 2024, the windfall profit levy alone pulled in nearly RM7bil in government revenue.
Silent sector
These are serious numbers. Yet, while sectors like technology, logistics and finance enjoy more tailored, growth-friendly tax structures, palm oil remains an easy target – immobile, visible, and too silent.
Unlike industries that can relocate or digitise, oil palm plantations are rooted in soil.
The capital sunk into land, palms and mills is long-term and irreversible. This physical immobility may offer governments a sense of fiscal predictability – but it should not translate into vulnerability.
Taxation must be fair, strategic, and forward-looking – not opportunistic.
Let's zoom in on the SST again. There's broad uncertainty: will it apply to products like fresh fruit bunches, palm kernel shells, palm fatty acid distillates, or by-products like empty fruit bunches?
Many of these are intermediate goods critical to downstream processes. Taxing them is like setting up toll booths at every intersection of a major highway – you slow down movement, increase costs and clog the system.
One credible estimate suggests that if the SST is applied across the oil palm value chain, it could shave off as much as 11% from industry earnings – an economic haircut we simply cannot afford.
Initially, plantation owners might not feel the pinch. But the pain will hit the mid and downstream players – mills, refineries, manufacturers – and that pressure will inevitably boomerang back upstream. In an already fragile ecosystem, this only adds to the uncertainty.
Worse still, when policies roll out with vague guidelines, limited stakeholder input, and last-minute exemptions, they don't just frustrate – they erode trust.
Seeking clarity
And yet, the palm oil private sector industry isn't asking for bailouts or handouts. No pleas for subsidies. What it seeks is something far more foundational: clarity in policy, consistency in enforcement and fairness in taxation.
The breathing space to plan, the fiscal headroom to reinvest – in replanting, mechanisation, innovation, training and sustainability.
Most of all, it asks for recognition. This is not a sunset industry. It must not be allowed to drift toward sunset through neglect or short-sightedness.
It is still a vital, living, breathing engine of national strength. With vision and the right incentives, palm oil can continue to anchor Malaysia's economy – fuelling rural development, securing food systems and advancing our green aspirations.
It's worth reflecting on the inconsistency in how we treat high-performing sectors.
In technology and finance, we incentivise growth. In palm oil, we tax success. This contradiction must be addressed if Malaysia hopes to remain competitive in an increasingly volatile global landscape.
The way forward lies in constructive dialogue and data-driven policymaking. The industry must step up in articulating its role, challenges and contributions.
Policymakers, in turn, must engage more intensely with stakeholders, not just during crises, but as part of a regular and transparent policy cycle.
So, here's a heartfelt invitation to decision-makers: step out from behind the spreadsheets.
Walk the estates. Talk to the growers. Visit the mills and downstream factories. See the people, the infrastructure, the resilience and quiet pride that fuel this sector.
Before crafting policies that may clip the wings of a bird still capable of soaring, come and understand what's truly at stake.
Yes, Malaysia needs revenue. And yes, taxation has its place in nation-building. But let's not tax the golden goose into extinction or turn it into a sitting duck.
Overburdening this sector risks stifling reinvestment, crippling competitiveness and compromising long-term national interests – including food and energy security.
This opinion is written not out of despair, but out of hope – hope that we can still get this right.
With foresight, fairness and genuine consultation, we can shape policies that protect the nation's coffers while preserving and empowering one of Malaysia's most enduring and strategic industries.
For 118 years, oil palms have stood tall in this country – not by accident, but by the grace of God, who blessed Malaysia with the right climate, rich soils, deep expertise and enabling policies.
This legacy must not be squandered. It must be sustained, strengthened and passed on with pride.
Because if we keep plucking feathers every fiscal season, don't be surprised when all we're left with is one lonely golden egg – and a very bald, very silent bird.
Joseph Tek has over 30 years of experience in the plantation industry, with a background in research, leadership and advocacy. The views expressed here are the writer's own.
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