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New tax law worsens future of forest plantation timber: TAS
Published on: Tuesday, November 12, 2019
By: Kan Yaw Chong
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KOTA KINABALU: Stakeholders in the forest plantations and processing industry have been urged to make their inputs count in the preparation of Sabah’s first Forestry and Timber Industry Master Plan. 

In his opening address at the Timber Association of Sabah (TAS) Forum on Forest Plantation, Processing and Sabah’s Economic Future, here, Monday, TAS President Norman Wong (pic) said: 

“I ask those who will be giving inputs to be generous with their time and efforts and look at things in a very holistic manner so that we can create something very good for Sabah.” 

The lack of comprehensive decision-making in this part of the world has led people to look at the upstream and downstream timber industry as two separate industries and “we begin to work in silos,” he noted.

“The danger of working in silos is that we do not see the connection with other sectors or other industries and so, when we solve the problem in one sector, we have created two problems somewhere else, and that is the Law of Unintended Consequences.”   

Attended by about 150 stakeholders, the forum’s purpose is to increase the contribution of forest plantation timber and highlight its latent potential for greater contribution through new products and services for the future of the industry.

“In today’s forum, we would like to see the economic value chain in progress. We will look at the resources, the activities of processing and these output, and one version of this compelling future is using Cross Laminated Timber (CLT) which you see in samples here today and by adding value to it, that will be an extension of the economic value chain,” Wong noted. 

“But let’s not be complacent, because there could be worse version and it could be better version,” he said. 

Citing a worse version, “I give you an example of a linear decision-making in a complex problem and that lies with the Inland Revenue Department (IRB),” he said.

“Early this year, the IRB passed a new law which says that carried forward losses for forest plantation companies is limited to seven years.

“What this means is that for good timber it needs more than seven years to grow (mature) at least 10 to 15 years.”

Pointing to the two demo samples of cross laminated timber wall panels on display, Wong noted: “These timbers here we use to mane CLT are 10 to 12 years.”

“For a tree planter to take advantage of the tax law, you will cut the tree in seven years so you’re eligible for all the expenses in the last seven years but that won’t give you a good timber for downstream processing the Government wants to promote,” he pointed out.

“If you cut the tree in year 10, your expenses in years 8, 9 and 10 are not eligible for tax deduction, so you can say goodbye to them,” he noted.

“Implicitly without bad intention, they have relegated forest plantation timber into a commodity item that is only good for pulp seven years when it could otherwise be high-value item for downstream processing.

“So, this means the IRD, with all its good intention, has become a big destroyer of economic value,” Wong said.

“And you can see these decisions which I don’t think they are made with consultation with the industry,” he lamented. 

“For us we will have to spend time to talk to Putrajaya to reverse that decision,” which in the heydays actually carried forward the losses up to 10 years.

“Time is a resource we all have very limited of,” Wong claimed. 

“As an industry we should spend more time pursuing opportunities rather than chasing after problem.”

“The opportunities are to go after the consumers’ wallet but because of these real thigs that we have to solve in the value chain plus there are problems, we are spending a lot of time pursuing the problems rather than the opportunities.”                      

Wong called for a better version for the future which is “the economic value chain, all the hiccups and hindrances removed so that the industry is able to perform better in the world stage and with that we want more people to get into planting and a more diversified downstream industry that will be more robust and can withstand the changes of the market better,” Wong concluded. 

  



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