International and national civil society groups have welcomed the announcement that international experts will support government authorities crack down on tax evasion by multinational companies in the forestry and fisheries sectors. The Organisation for Economic Cooperation and Development (OECD) is sending auditors to Papua New Guinea early next year to work with officials from the Finance Department and Internal Revenue Commission, under its Tax Inspectors Without Borders Program.
“We are glad to see the government take action on this vital issue," said Frederic Mousseau, Policy Director of the Oakland Institute and the author of two investigative reports that have exposed financial misreporting by multinational logging companies in PNG. “The schemes set up by logging companies are complex, involving multiple subsidiaries and tax havens and the techniques used to avoid taxes are very sophisticated. Therefore support from international experts is key to address the grave situation".
PNG government’s partnership with the OECD follows the public outrage over revelations that logging companies continue to avoid taxes by reporting mounting losses even as they increase timber harvesting to record levels.
In 2016 the Oakland Institute released a report alleging that financial misreporting was resulting in the nonpayment of hundreds of millions of dollars in taxes. A second investigative report in September 2018 revealed the worsening of tax evasion.
“According to financial records, 16 studied subsidiaries of PNG’s largest log exporter, the Malaysian Rimbunan Hijau Group, doubled their financial losses in just six years while increasing their exports by over 40%. The more these companies harvest and export timber, the more money they declare as losses and as a result they almost never pay any income taxes,” explained Mousseau.
ACT NOW! has been working with the Oakland Institute to lobby government authorities to take action on the financial misreporting and the wider issues of illegal logging and land grabbing.
“The tax evasion by these international companies deprives the government of vitally needed revenues and defrauds the people of better health and education services” said Eddie Tanago.
While praising the Treasurer and Deputy PM, Charles Abel, for his announcement, ACT NOW! cautions the problems are far wider than just tax evasion.
"As well as investigating the transfer pricing and profit shifting that the companies use to avoid paying taxes, the government must also critically assess whether destructive and unsustainable resource extraction industries really benefit the nation,” said Tanago. "It is time the government set an alternative development path that is true to our National Goals and which promotes self-reliance and the wise use and protection of our natural resources”.