Issue in context

In January 2016, an amendment to a Bill entitled ‘Reconquering Biodiversity, Nature and Landscape’ was adopted by the Senate. This amendment was proposed by several Senators and members of the Groupe écologiste (Greens).

The amendment creates an additional contribution – a special tax – on palm oil. This contribution is set at 300 Euros per tonne in 2017; 500 Euros in 2018; 700 Euros in 2019; and 900 Euros in 2020. This rate will then be increased on Jan 1 of each year from 2021, depending on the projected evolution of consumer prices. The tax will only apply to palm oil and not to competing oils.

The amendment is presented as putting an end to an unfair taxation regime: the Senators argue that palm oil currently benefits from a much lower tax rate than its competitors. The argument is in fact utterly wrong because it is based on an inaccurate understanding of economics.

The truth is that palm oil is taxed more compared to competing oils: this tax level on its own is already discriminatory. Palm oil would be unfairly penalised to an even greater extent by the additional tax proposed by the Senate.

Error of the situation

In the presentation of the 2016 amendment to the Biodiversity Bill, the assertion is made: ‘Not only palm oil is cheap but, in France, it is one of the least taxed oils.’ To state that palm oil is taxed less than other vegetable oils, is economically wrong.

This misunderstanding is based on the fact that the legal text fixing the amount of excise tax for various vegetable oils shows indeed a higher absolute amount of tax paid on olive oil than on palm oil. Table 1 reproduces the amount of tax due per 100kg as presented in the legal document.

tax-france-table1

Indeed, looking at the table, olive oil appears to be taxed twice more heavily than rapeseed and almost twice as much as palm oil. But do those comparisons have any economic meaning? The answer is a resounding ‘No’.


 

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