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    Friday, March 18, 2016

    French Assembly Adopts Softer Tax On Palm Oil Used In Food

    * New tax exempts environment-friendly palm oil

    * Minister says in line with international trade rules

    * Tax still needs to be reviewed by upper house (Recasts with changes to tax to make it gradual)

    PARIS, March 17 France's plans to impose an additional tax on palm oil used in food from 2017 moved a step closer on Thursday as the National Assembly approved the levy, which has been vehemently opposed by top producers Indonesia and Malaysia.

    However, the extra tax aimed at encouraging the sector to reduce the environmental damage palm oil plantations can cause, has been sharply reduced from an initial proposal in January and now excludes oils produced in a sustainable way.

    Lawmakers on Thursday also agreed to introduce the new tax gradually to soften its impact. The tax would now start at 30 euros ($34) in 2017 and rise by 20 euros per year to 90 euros in 2020, rather than start at a flat rate of 90 euros.

    The new levy, which would come on top of an existing one of 104 euros per tonne, would be well below the upper house's original proposal that started at 300 euros.

    The French government backs the tax, originally proposed by a senator, since it has been reduced and excludes oils that producers can prove were produced in a sustainable way.

    The levy, part of a wider biodiversity bill expected to be adopted on Friday, still needs to be reviewed in the upper house, likely in May or June.

    "The introduction into France's fiscal legislation of a tax on products whose impact on deforestation is recognised worldwide, gives a strong signal by France in terms of environmental protection," Barbara Pompili, Junior Minister for the environment in charge of biodiversity, told the National Assembly.

    Indonesia and Malaysia have said the tax is discriminatory and Indonesia raised the issue at the World Trade Organisation earlier this month when the level of the new levy was still at 300 euros a tonne for all palm oil used in food.

    "This tax clearly respects the Treaty of the World Trade Organisation because it only targets palm and copra oil that do not meet sustainable environmental criteria," she said.

    But Malaysian producers did not agree.

    "The 'differential' tax proposal is a clear violation of both WTO and EU rules," Yusof Basiron head of the Malaysian Palm Oil Council (MPOC) said in a statement, calling a tax at 90 euros disproportionate.

    Copra (coconut) and palm kernel oil, also subject to the tax, are commonly used in commercial cooking. They are currently taxed at 113 euros a tonne.

    The tax would not affect cosmetics and biofuels - two sectors in which vegetable oils are widely used.

    France imports about 100,000 tonnes of Indonesian palm oil a year and imported 11,000 tonnes of Malaysian palm oil last year.

    Palm oil producers expressed concern ahead of the vote, saying that even though French imports were not big, the new tax may have repercussions in other countries.

    Previous attempts in France to impose a special tax on palm oil have failed, mainly due to strong lobbying from producing countries.

    Past proposals were dubbed the "Nutella tax" by the French media because the popular chocolate-hazelnut paste contains about 20 percent palm oil.

    However, since 2013, Nutella sold in France has been made only with palm oil from sustainable supplies, the maker, privately owned Ferrero, says. That would make Nutella exempt under the terms of the current proposal - the first to differentiate on that basis.

    Strong public opposition to palm oil in France, also amid fears that its high level of saturated fat could be harmful to human health, has prompted several supermarkets in the country to commit to ban the use of palm oil in their own-brand products by the end of the decade.

    ($1 = 0.8829 euros) (Additional reporting by Emile Picy, editing by Susan Fenton and Richard Pullin)
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