There’s no denying it – oil palm growers are thriving.
According to The Star (Aug 11, 2025), plantation stocks, once brushed off as the “plain Janes” of Bursa Malaysia, are now enjoying a moment in the spotlight.
With crude palm oil (CPO) prices is now holding firm around RM4,500 per tonne, the sector is seeing a surge in financial health.
Out of 42 listed plantation companies, 25 are now sitting comfortably on net cash positions. Dividend payouts are notably attractive and balance sheets are stronger than ever. For once, many planters are reaping the fruits of their labour.
Their formula for success isn’t magic. For many, it’s a combination of mature, high-yielding estates, prudent cost control and current commodity prices.
In the quietly resilient world of oil palm, these companies are navigating with steady purpose and forging ahead.
They may not have the tech swagger or environmental, social and governance sparkle of other sectors, but right now, they are cash-rich, low in debt and can confidently reward shareholders.
Yet, amid the chart-topping earnings, there lingers a less glamorous guest at the party: taxation.
And as is often the case, when profits rise, so too does the chorus of “Well, if they’re making money, continue to tax and why not squeeze a little more?”
It’s a seductive logic – simple, populist and conveniently blind to nuance
Case for a mature tax conversation
Palm oil, as we all know, is no stranger to the wild ride of global commodities – cyclical, volatile and dancing to geopolitics and weather woes.
When prices surge, it can feel like manna from heaven; when they fall, they do so with the grace of a durian off a tree.
Today’s bullish outlook may offer comfort, but seasoned planters know the truth: what goes up rarely asks permission before coming back down.
It is precisely during these profitable upswings that the industry’s tax framework should come under the microscope – not as a protest, but as an act of prudence.
After all, it’s far easier to make reforms when the coffers are full and tempers calm.
If we wait until the next market downturn, the appetite for reform may vanish just when the sector needs support the most. That’s why I keep saying: it’s not about taxing more or less, but using this window of prosperity to build long-term resilience and competitiveness.
Now, to be clear: taxation in the palm oil sector isn’t a forgotten cousin. If anything, it’s a sprawling family tree.
Growers pay a Malaysian Palm Oil Board cess, windfall profit levy (WPL), state sales tax (SST) in Sabah and Sarawak, and the usual corporate income tax. According to data compiled by the Malaysian Estate Owners’ Association (MEOA), the total estimated tax burden on oil palm growers last year amounted to a hefty RM11.56bil.
That’s enough, to build 100 new government hospitals or double Malaysia’s current public hospital count within 18 months. But beyond headline numbers lies a thicket of complexity – one MEOA has been meticulously untangling in its data-driven annual tax computations.
What growers actually pay
MEOA’s fiscal map is built on a simple but powerful model: estimate tax exposure based on actual national CPO and crude palm kernel oil (CPKO) production, overlay it with official price data, deduct realistic costs (including replanting and overheads), and apply the prevailing tax formulas.
The result? A vivid snapshot of just how much growers across Malaysia are contributing and absorbing.
Last year, Malaysia produced 19.34 million tonnes of CPO and 2.14 million tonnes of CPKO, with production split roughly 56% from Peninsular Malaysia, 22% each from Sabah and Sarawak.
Average estimated production costs per tonne: RM2,675 in the peninsular, RM3,050 in Sabah, and RM3,320 in Sarawak.
Now, add taxes. MPOB cess fixed at RM16 per tonne of CPO and CPKO. It raised RM344 million last year to fund everything from research and development, licensing and enforcement, marketing efforts via the Malaysian Palm Oil Council, sustainability certification under the Malaysian Sustainable Palm Oil standard and conservation via the Malaysian Palm Oil Green Conservation Foundation.
But national production has plateaued – meaning collections have stagnated. The math is clear: each RM1 per tonne only yields about RM20mil. Research and development ambitions are growing; funding isn’t.
The WPL is triggered when prices exceed RM3,000 per tonne in Peninsular Malaysia and RM3,500 per tonne in Sabah and Sarawak. At 3% of fresh fruit bunce value, it collected RM1.71 billion last year alone.
While the government recently revised thresholds upward by RM150, the underlying critique remains: WPL assumes high prices always equal high profits – a simplification that doesn’t sit well with growers juggling rising costs and variable yields.
Next comes the SST. Sabah applies 7.5% on CPO prices above RM1,000 per tonne, while Sarawak uses a tiered model: 2.5% above RM1,000 and 5% above RM1,500 on both CPO and CPKO.
These thresholds have not been meaningfully revised in decades, despite rising costs.
The result? RM1.357 billion collected in Sabah and RM886 million in Sarawak – deepening the cost divide between Sabah and Sarawak and Peninsular Malaysia.
Lastly, there’s corporate income tax, with an assumed effective rate of 22%. Despite tiered small and medium enterprise rates (15% and 17% for smaller incomes), many plantation companies end up paying full freight. Total industry contribution last year: RM7.158bil.
MEOA estimates show peninsular growers face an effective tax rate of 26.4%, while those in Sabah and Sarawak bear steeper burdens of 40.4% and 42.4% respectively. In palm oil, even taxes come with a divide across the South China Sea.
Uneven playing field, uneven impact
While the combined tax haul is impressive, the impact is not equally shared. Pure upstream producers, particularly those with fully mature estates and economies of scale, are doing well. But for mid-sized players and smallholders, it’s a different story entirely.
Smallholders, defined as those with 40ha or less, are exempt from WPL. It’s why the industry often jokes: “Got 41ha? Sell one.”
But beneath the humour is an uncomfortable truth – that a system designed to be fair has, over time, become blunt in its application.
The realities of cost, geography and market access are not always reflected in how the tax burden lands.
Sabah and Sarawak producers face additional headwinds, let’s call it a geography penalty.
With limited downstream infrastructure, CPO and palm kernel are also sold at a discount of RM50 to RM80 per tonne to peninsular prices. For producers already facing higher costs and higher taxes, it’s a double whammy that erodes competitiveness.
Replanting, mechanisation and the risk of inertia
The situation worsens with long-term investments like replanting and mechanisation. Replanting can cost over RM25,000 per hectare, with no revenue for at least three years – a high-capital expenditure gamble few heavily taxed growers are willing to take, even in good times.
Meanwhile, mechanisation especially harvesting remains the sector’s Holy Grail – but one that requires time, testing and capital.
Chronic labour shortages are forcing estates to leave ripe fruit unharvested. It’s not just missed profit. It’s untapped tax revenue, lost employment multipliers and wasted economic potential.
And if the MPOB Cess and industry research and development incentives remain flat while industry needs rise, then expectations must be adjusted or funding/incentive models revisited.
One cannot expect world-class transformation from a stagnant resource pool.
Time to rethink, not retrench
None of this is to argue that palm oil growers shouldn’t pay taxes. They should and they do. But if we are to ensure long-term sustainability, competitiveness and shared prosperity, then the tax system must evolve to reflect the changing realities of the industry.
A system that taxes indiscriminately, risks penalising the very players we rely on for food security, rural development and foreign exchange. The goal should not be to squeeze more out of the industry, but to design a smarter, more agile fiscal model – one that enables replanting, supports mechanisation, rewards efficiency and offers targeted relief where it’s needed most.
Because, yes, many planters are doing well and they are paying their dues. But unless we balance today’s gains with tomorrow’s needs, we may find ourselves hollowing out the roots of an industry that still has much to give.
In short, you can’t keep harvesting the fruit if you’ve taxed the tree into fatigue. The time to talk isn’t when the next crisis hits – it’s now.
Joseph Tek Choon Yee has over 30 years experience in the plantation industry, with a strong background in oil palm research and development, C-suite leadership and industry advocacy. The views expressed here are the writer’s own
