Foreign owned logging companies could be defrauding the country of hundreds of millions of dollars in tax revenues and ACT NOW! is calling for a moratorium on any further logging licences until there is a full and transparent investigation and the cancellation of all illegal SABL leases.
A new report titled ‘The Great Timber Heist Continued’, released today by the Oakland Institute, shows while some logging companies have been increasing the amount of timber they harvest, much of it from illegal SABL areas, their declared losses have also been increasing and as a result they are paying little or no corporate taxes.
Not only do these logging companies not pay their fair share to the government, they also avoid the huge social and environmental costs of their destructive practices.
The Oakland Institute report also rubbish’s claims made by the Forest Minister and Industry Association that increases to log export tax rates introduced in 2017 would cause the logging industry to collapse and companies to abandon their operations.
Instead, Papua New Guinea continues to be the world’s largest exporter of tropical logs and exports look set to reach new heights in 2018.
The Great Timber Heist exposes two glaring anomalies in the financial reporting of the logging companies operating in PNG. First the average price they declare for their log exports are 33-40% below world prices. Secondly, the more the companies harvest and export, the more their losses grow.
This “raises the significant possibility that logging firms might be engaging in financial misreporting tactics to avoid paying income tax and reduce the amount of log export taxes and levies” says the Oakland Institute.
The Institute estimates that PNG could be losing out on as much as $100 million in government revenues from the logging industry every year because of financial misreporting and a lack of effective policing by government agencies.
This analysis is very similar to that for the mining, oil and gas sector recently published by Glenn Banks and Martyn Namorong. They uncovered that while ten years ago the government was collecting more than K2 billion annually from the sector by way of taxes and dividends, on mineral exports of K10 billion. In 2017, the figure was just K400 million on exports of K25 billion – a revenue reduction of more than 80% in the same time that exports have increase by 150%!
The evidence shows that large-scale resource extraction defrauds the government of revenue, it defrauds local people who do not receive the promised benefits and it defrauds our environment, communities and culture which all suffer the negative consequences of industries run for the benefit of our old colonial masters.
It is urgent, espeially given the cash flow problems faced by the country, that the government must place a moratorium on all new logging permits, forest clearance authorities and extensions until there is a full and transparent investigation of logging company financial returns, export prices and the losses they declare.
At the same time the government must honour its promises to cancel all illegal SABL leases, and return the land to customary ownership and ensure proper compensation is paid.