Major producing countries said proposed tax was discriminatory and against international trade rules
* Government to propose new tax scheme on vegetable oils
* Aims to harmonise taxes on vegetable oils, clarify rules
* New French plan due within six months after law (Adds reaction from Malaysian producers)
By Sybille de La Hamaide
PARIS, June 23 (Reuters) - France's National Assembly has scrapped plans for an additional tax on palm oil, which had caused outcry among major producers, after the government put forward an alternative proposal that would include other vegetable oils used in food.
Indonesia and Malaysia, the world's two largest producers, had said the plan, which was aimed at encouraging the sector to reduce the environmental damage palm oil plantations can cause, was discriminatory and broke international trade rules.
The Malaysian Palm Oil Council representing local producers, which had also claimed the tax would put thousands of small farmers out of work, welcomed the National Assembly's decision.
"The French government should drop once and for all this unfair and unjust tax campaign against palm oil," it said.
Palm oil is one of the least taxed vegetable oils in France and the government proposed a last-minute amendment on Wednesday, which says the state will put forward a new scheme to harmonise taxes on such oils and include an exemption for those that are sustainably produced based on "objective criteria", within six months after a wider biodiversity law is enacted.
Legal uncertainty around the tax, which focused on only one type of vegetable oil and contained a tax exemption based on sustainability criteria that were not clearly identified, had prompted the change, France's Secretary of State for Biodiversity 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.
The proposal has been going back and forth between the French National Assembly and the Senate, but it is the National Assembly which has the final word.
France's initial proposal 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 in which the tax was included did not pass through the Senate, forcing the two assemblies to find an agreement. The meeting ended in a deadlock.
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.
Attempts had failed mainly due to strong lobbying from producing countries. (Reporting by Sybille de La Hamaide; Editing by John Stonestreet and Alexander Smith)
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