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Brussels. In a double blow to Singapore-listed Wilmar, the world’s largest listed palm oil firm owned by Indonesian tycoon Martua Sitorus, is being investigated over $281.4 million in tax refunds, while the European Union says palm oil grown on recently deforested land is unlikely to be acceptable for use in European biodiesel.

The Indonesian unit of Wilmar said on Wednesday that the country’s tax office has started an investigation into 12 subsidiaries on its 2007-2008 tax report.

“The investigation started about three weeks ago,” said Henri Saksti, president director of PT Wilmar Nabati Indonesia.

“About 32 officers from the tax office came and looked into our reports in 2007 and 2008.”

Tax payments by Indonesian mining and agriculture companies will be subject to closer scrutiny because they are below expectations, the head of the country’s tax office said last week.

Saksti said that Wilmar managed to get 2007 and 2008 tax refunds worth about 2.6 trillion rupiah ($281.4 million) from the tax office.

A parliamentary commission said that it has also ordered the State Audit Agency (BPK) to look into Wilmar tax cases.

Wilmar said a week ago in a statement to the Singapore stock exchange that it categorically denies allegations that VAT refund claims by its Indonesian subsidiaries are questionable and fictitious.

Meanwhile, palm oil grown on recently deforested land is unlikely to be acceptable for use in European biodiesel, a draft report from the European Commission shows.

The decision aims to curb any environmental damage from biofuels and could limit future export markets for Asian producers such as Indonesia’s PT SMART, Singapore’s Wilmar and Malaysia’s Sime and IOI Corp.

The European Union aims to get 10 percent of its road fuels from renewable sources by 2020, and 7 percentage points are expected to come from land-using crops such as grains, palms or sugar cane.

But critics charge that the multi-billion-dollar market will compete with food crops, forcing up grain prices and encouraging farmers to expand their land by hacking into tropical forests.

The EU’s executive arm has responded with a set of environmental standards, which will be announced by Energy Commissioner Guenther Oettinger today.

The development of the rules has been closely watched by Indonesia, especially as early drafts appeared to remove all barriers to palm plantation expansion by defining the plantations as another type of forest.

But a more recent draft seen by Reuters on Wednesday ruled that out.

“Any change in land use, including for example a change from forest to palm plantation, must be taken into account in the calculation of the greenhouse gas impact,” it says.

An EU source said the draft was not the final version to be launched by Oettinger on Thursday, but its meaning was the same.

“You cannot chop down forests and convert them to palm plantations and use those fuels to meet the EU’s biofuel targets,” the official said on condition of anonymity.

“Oettinger is trying to make certain that the EU biofuels strategy is credible.”


Bloomberg/JG