Progressive Scheme of Taxation Support LSIP. The government plans to increase export duty rates with a progressive scheme for crude palm oil (CPO) and its derivative products starting next year. The progressive scheme causes the tax rate to increase if the number of tax objects increases.
And the value of the tax object increases. The Coordinating Minister for Economic Affairs Airlangga Hartarto said that the export duty rate for CPO was progressively around US $ 12.5 per US $ 25 increase. Meanwhile, CPO derivative products were subject to US $ 10 per US $ 25 price increase.
This policy aims to maintain the sustainability of oil palm programs such as B30 and rejuvenation of smallholder palms. Philip Sekuritas analyst Michael Filbery assesses that the implementation of this policy will increase the proportion of the export tax burden that must be paid by palm oil issuers.
Especially those with a large proportion of export sales. This progressive export tax levy rate can also cause the competitiveness of the Indonesian CPO market to become less competitive. On the other hand, government revenue from the absorption of CPO export levies will be use for the purposes of developing biodiesel programs.
As well as incentives for biodiesel production. That way, later, the absorption of CPO for biodiesel needs has the potential to increase. So, although on the one hand it will increase the sales burden of palm oil producing companies, this policy will also boost the absorption of CPO in the country, said Michael.
This condition provides opportunities for palm oil producer companies to monetize the increase demand for CPO in the domestic market. Overall, this policy also has a positive effect on CPO producer stocks. Until the end of the year, CPO shares are predict to have positive prospects in line with the CPO selling price.
Which is estimate to remain above MYR 2,500 per ton. This is support by the La Nina phenomenon which cuts the prospect of CPO production in the fourth quarter of 2020. In addition, the prolonged dry climate in the United States (US) has caused the prospect of soybean production to decline.
So that the price of soybean oil increases. He recommended to buy shares of PT Astra Agro Lestari Tbk (AALI) with a target price of IDR 14,700 per share and PT PP London Sumatra Indonesia Tbk (LSIP) IDR 1,410 per share. Even so, CPO prices face a downside risk from the weakening of crude oil prices.
Due to the spike in Covid-19 cases in the US and Europe which could cause crude oil demand to shrink. As is known, biodiesel is a substitute for crude oil. With the decline in crude oil prices, biodiesel prices are less competitive. This can cause the potential for biodiesel demand to fall so that it affects the selling price of CPO.