Dubbed the 'Nutella tax' by French media, the tax rate has been revised down to 90€ per tonne from the initial proposed rate of €300 that would have progressively increased to reach 900€ per tonne in 2020. Parliamentary rapporteurs feared the initial rate would not have passed World Trade Organisation (WTO) rules.
The palm oil tax, which would apply to food products only and not biofuels or cosmetics, is part of a wider-reaching Biodiversity Bill.
Walking on 'flimsy and false' economic ground?
But despite the rate being lowered, the proposed tax has provoked anger from palm oil-producing countries, such as Malaysia and Indonesia. CEO of the Malaysian Palm oil Council (MPOC), Yusof Basiron, said: “The proposed tax is based on flimsy grounds that palm oil is under taxed in France. This is false. The [National Assembly] has also proposed a ‘differential’ tax which would discriminate between different palm oil producers based on unspecified, unworkable, and discriminatory views of sustainability. This action clearly undermines the national development goals of developing countries. The differential tax proposal is a clear violation of both WTO and EU rules.”
The MPOC commissioned professor of economics at the University of Aix-Marseille, Pierre Garello, to evaluate the proposed fiscal measure. According to Garello, palm oil is already taxed at 21.7% compared with 4.9% for olive oil; 15.79% for sunflower oil or 23.64% for soybean oil.
“The additional tax on palm oil would raise this tax discrimination to extraordinary levels [of 209.7% tax on palm oil],” said Garello's report.
Nathalie Lecocq, director general of Fediol, the European trade group that represents the interests of the vegetable oil industry, told FoodNavigator that while Garello's figures are probably based on average prices that fluctuate significantly - rendering them "meaningless" - Fediol also believes the law to be discriminatory.
“It is not the first time that such additional tax finds its way through the French institutions," she said. "There have been repeated attempts to target palm oil in particular. Admittedly, the motivation has changed. In the past, the justification was nutrition; later, it was deforestation; this time, it is ‘sustainability’. However, the objectives of the initiators of this additional tax seem rather clearly to limit the uptake of palm oil in French supply chains and in food products as much as possible.”
In 2012, the French Senate rejected a proposed tax on palm oil which would have quadrupled the tax on the ingredient.
Sustainable would be exempt
A second amendment, also adopted, would see palm oil produced in a sustainable way exempt from the tax, arguing that the original bill would have gone against the Amsterdam Declaration, signed by France in December 2015 which is aimed at supporting the private sector’s commitment to sourcing 100% sustainable palm oil in Europe by 2020.
A spokesperson for the Roundtable for Sustainable Palm Oil (RSPO) said while the RSPO is not in a position to comment on specific fiscal measures it welcomes the sustainable exemption as a signal to increase the uptake of certified sustainable palm oil in France.
But not everyone believes an exemption for sustainable palm oil is a good idea.
Writing on her website, French senator Aline Achimbaud said certified sustainable plantations are not less dangerous for the environment in terms of ecosystem land clearance and the use of certain pesticides, such as paraquet, which has been banned in Europe since 2007.
Meanwhile, Fediol cites other reasons for opposing this amendment, with Lecocq arguing that the lack of a clear definition of sustainable could hinder future efforts. “There [are] more that can be validly considered sustainable than 'just' RSPO, which is what makes it really complicated to define accurately.”
A tax on palm oil is also being considered in Russia for health reason, with a possible levy of $200 (€180) per tonne being applied to palm oil as early as 1 July 2016, according to some reports.