UPDATE 1-French parliament scraps planned extra tax on palm oil

* Government introduced amendment proposing new tax scheme

* Aims to harmonise taxes on vegetable oils, clarify rules

* New French plan due within six months after law

(Adds details)

By Sybille de La Hamaide

PARIS, June 22 France’s National Assembly on
Wednesday scrapped plans for an additional tax on palm oil,
which had raised an outcry in major producing countries, after
the government said it would propose a new tax scheme for
vegetable oils used in food.

The world’s two largest palm oil producers, Indonesia and
Malaysia, had said the tax, which aimed at encouraging the
sector to reduce the environmental damage palm oil plantations
can cause, was discriminatory and against international trade
rules.

The government proposed a last-minute amendment, which
states the State will put forward a new scheme within six month
after the law’s promulgation this summer, to harmonise taxes on
vegetable oils and include a tax exemption for sustainable oils
based on “objective criteria”.

Palm oil is one of the less taxed vegetable oils in France.

The main reason for the government’s move was a legal
uncertainty around the initial tax which was focusing only one
type of vegetable oil and containing a tax exemption based on
sustainability criteria that were not clearly identified,
France’s Secretary of State Barbara Pompili told Parliament.

“There is no question to stigmatise one or another country,
we are here to find long-term rules that favour sustainable
development by helping as much as we can to certify sectors from
other countries,” she told the National Assembly.

France’s initial proposal for an additional tax on palm oil
in food had been softened by the National Assembly in March by
excluding sustainable palm oil and sharply reducing the amount
of the levy.

But the biodiversity bill did not pass through the Senate,
forcing the two assemblies to find an agreement. The meeting
ended in a deadlock.

The re-introduction of the tax in the biodiversity bill last
week prompted a vehement reaction from Malaysian producers.

In a statement they claimed the tax was a violation of World
Trade Organisation and EU trade rules, that it would contribute
to putting 300,000 small farmers out of work and would have a
negative impact on relations between France and Malaysia.

This is not the first attempt by French lawmakers to impose
a tax on palm oil which campaigners say contributes to
deforestation and impacts biodiversity. The first one, in 2012,
suggested to quadruple the tax on palm oil.

Previous ones failed mainly due to strong lobbying from
producing countries.

(Reporting by Sybille de La Hamaide; editing by John
Stonestreet)

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