1 The Effect of Progressive Export Tax on Indonesian Palm Oil Industry * Department of Agribusiness, Faculty of Economics and Management, Bogor Agricultural University, Bogor 16680. Indonesia. E-mail: amzul_rifin@yahoo.com INTRODUCTION Palm oil is considered to be an important product in Indonesian economy. This commodity is also an important export commodity and in 2012, palm oil export was valued at USD 17.6 billion or 9.36% of Indonesia’s total export in 2012. Palm oil export commodity can be classified into two products, crude palm oil (CPO) and refined palm oil (RPO). RPO consists of several products which utilise CPO as its raw material and these products have higher value-added Amzul Rifin* ABSTRACT The government of Indonesia imposed export tax on crude palm oil (CPO) and its derivatives since September 1994 and in September 2007, the progressive export tax is implemented. This policy has two objectives, first is to guarantee the availability of domestic CPO as the main raw material of cooking oil which is one of the staple products of Indonesia. Secondly, is to develop the downstream industry of the palm oil industry which has higher value-added compared to CPO. By limiting CPO export, hopefully the CPO will be utilised to produce higher value-added product. The objective of this article is to analyse the effect of export tax on Indonesian palm oil industry. The results indicate that export tax will decrease domestic CPO price, production, export and competitiveness. The policy will made producers worse off while consumers and cooking oil producers will be better off. On the other hand, the policy is able to increase the refined palm oil export and stabilise the cooking oil price. Keywords: export tax, crude palm oil, Indonesian palm oil industry. compared to CPO. In 2012, RPO export dominates with 62% while the rest is CPO export. This composition has shifted compared to 1990 when 81% of Indonesia’s palm oil export was in the form of CPO while the rest was RPO. In addition, during the period of 1990-2012, RPO export grew by an average of 36% while CPO export grew by 25% in the same period (Figure 1). As an important export commodity, palm oil is also an important raw material for cooking and it is considered to be a staple