KUALA LUMPUR: The government may lose up to RM2.0 billion in additional tax collection from the palm oil sector due to the expected loss in production revenue between 20 per cent and 30 per cent in 2021.
Malaysian Palm Oil Association chief executive officer Datuk Mohamad Nageeb Wahab said the industry might not generate an extra RM20 billion revenue this year, dragged by the nationwide acute shortage of about 75,000 of manual harvesters.
The century-old industry has been experiencing the labour shortage since the government had frozen the intake of foreign workers in March 2020.
"This shortage translates to an alarming 20 per cent to 30 per cent shortfall in our potential crude palm oil (CPO) production.
"For now, the oil palm sector is at the breaking point. If left unchecked, the numbers may escalate and we may not be able to compete with our neighbours in terms of cost," Mohamad Nageeb said in a dialogue session at the National Recovery Summit yesterday.
He said the industry had been enjoying a long bull run in CPO prices, averaging more than RM4,000 per tonne in the first half of 2021.
"This is unprecedented and the highest ever. It is mainly due to the short supply of edible oil worldwide due to many factors such as weather and logistics.
"We expect this trend to prevail through 2022. As a result, we can see plantations companies reporting good returns, despite lower yields and higher operational cost brought about by the continued shortage of workers."
Mohamad Nageeb said the industry could have done much better if the players could optimise their production.
"Even with much lower production and returns, the expected total effective tax (levy and cess) paid to the government will be in the range of RM9 billion to RM12 billion for 2022. This is all the low-hanging fruits that we are giving to the government," he said.
Mohamad Nageeb said the industry was highly dependent on foreign workers, which accounted for about 84 per cent of its total workforce of 750,000 labours.
As a result of labour shortfall, the industry's revenue loss was estimated at RM10 billion to RM12 billion last year, based on average CPO price of RM2,685 per tonne.
"That big shortfall (reduction) in revenue resulted in the reduced contribution of about RM1 billion in taxes to the government. The total taxes paid out by the industry amounted to about RM5.2 billion in 2020," he added.
Malaysia produced about 19.14 million tonnes of CPO in 2020, or 26 per cent of the world's production.
The industry generated an export revenue of RM73.3 billion and contributed 3.6 per cent of the country's gross domestic product in 2020.