Figure 3 shows the result of these calculations: the ad valorem equivalent. This is the actual percentage of taxes paid by different oils in France as a percentage of the price. This gives an economically accurate and meaningful picture of the actual taxation on different vegetable oils.
As we can see, the ‘problem’ that the Senators are trying to ‘remedy’ – that palm oil is under-taxed compared to others – simply does not exist once proper economic understanding is applied.
The new tax on palm oil is clearly not needed. Just as clearly, it would be obviously unjustified and massively discriminatory based on the actual tax situation.
As Figure 3 shows, palm oil is actually taxed substantially more than olive oil and rapeseed oil (though less than soybean oil, for example). The rhetoric of Senators and commentators who keep denouncing the alleged ‘tax advantage given to palm oil’ does not stand up even to basic economic scrutiny.
We have therefore established the real current situation: palm oil is over-taxed in France.
The current situation is one of ‘insufficient taxation of palm oil’, according to promoters of the amendment in the Biodiversity Bill. They propose – and the Senate has agreed – to add a contribution set at 300 Euros per tonne in 2017; 500 in 2018; 700 in 2019; and 900 in 2020. This rate would then be increased on Jan 1 of each year starting 2021, depending on the projected evolution of consumer prices.
What would the new tax mean for the tax burden on palm oil compared to other oils? Figure 4 provides the answer.