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Dramatic revelations on tax evasion & illegal logging in PNG

Taking on the logging piratesFREDERIC MOUSSEAU | Policy Director, Oakland Institute

The full report on 'The Great Timber Heist Continued' is available at https://www.oaklandinstitute.org/great-timber-heist-continued-papua-new-guinea

OAKLAND, CALIFORNIA - In a just released investigative report, ‘The Great Timber Heist-Continued: Tax Evasion and Illegal Logging in Papua New Guinea’, the Oakland Institute has made public new evidence of financial misreporting and tax evasion in the logging industry in Papua New Guinea.

Following its 2016 report, which alleged that financial misreporting by foreign firms resulted in non-payment of hundreds of millions of dollars in taxes, the new report reveals drastic worsening of this pattern in recent years.

According to the financial records, the 16 studied subsidiaries of PNG’s largest log exporter, the Malaysian Rimbunan Hijau (RH) Group, have doubled their financial losses in just six years while increasing their exports of tropical timber by over 40%.

Despite decades of operations in PNG, logging companies barely declare any profits.

The official tax filings of most firms report losses year after year. How is it then possible for these companies to still remain in business if they don’t make profits? Any other business under such circumstances would have shut down by now.

Even more puzzling is that the more Rimbunan Hijau subsidiaries harvest and export timber, the more money they declare in losses.

Not only do they almost never pay any income tax, but their continued losses allow them to accumulate an astounding volume of tax credits – making it likely that they won’t pay any income tax for years to come.”

The new report also analyses the effect of the progressive tax rate on log exports introduced in 2017 by the PNG government to address concerns around tax evasion. PNG’s Minister of Forests and the forest industry have argued that this new tax has brought the industry to “the brink of disaster,” resulting in “vanishing” tax revenue for the country.

However, the Oakland Institute’s latest report clearly refutes these claims showing that the tax increase has generated additional fiscal revenue while contributing to an overall drop in exports in 2017.

The tax reform does not appear to be enough of a deterrent to significantly affect logging operations in the country.

PNG has doubled its exports of tropical timber over the past ten years and remains the world’s largest exporter. After the decline throughout much of 2017, the volume of logs exported returned to their upward trend in October. The logging industry is clearly far from the ‘disaster’ alleged by its proponents.

The increase in log exports in recent years by PNG is largely the result of illegally-granted Special Agriculture and Business Leases (SABLs), which added 5.5 million hectares of land to the 10 million hectares already under active logging concession.

Despite the 2014 government’s promise that all illegal deals would be cancelled, to date no decisive action has been taken to stop illegal logging or return land to the people.

The recent tax increase may be a step in the right direction but it is not enough to curb the illegal logging operations, which continue to expand.

Our hope is that this research will help the policy makers see how the logging companies continue to pull wool over their eyes so they take urgent action to end the harmful practices of the industry.

Comments

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Lindsay F Bond

Are these the failings not of mankind, but of men? At the "critical issue of landowner consent"...

"There were no women recorded as speaking at the meeting despite the DAL report noting females make up more than half the population. The DAL team itself was comprised of three males." [only lads, not ladies.]

See: http://pngicentral.org/reports/woodlark-island-logging-scam-part-4-large-scale-fraud

PNG Constitution includes that word 'equity', but equity exits no lips of lads?

Philip Fitzpatrick

Welcome to RHL (Rimbunan Hijau Land) previously known as PNG (Papua New Guinea).

Mathias Kin

This issue of tax evation and illegal logging on PNG soil is only small cup of a full pond of corrupt deals the politicians have been involved in since the beginning.

Everybody who has worn that crown to be called a Prime minister and his Forrest ministers have been implicated here and there over the years and it is always in deals with Rimbunan Hijau.

Nobody has stood up for our people, to say enough is enough, let's think for future our children. Not one pm or minister, they are all so so bloody corrupt. The current one is the worst.

It makes me really sad I am a PNGian. Why? Why? Can't we do something better? Something right? Are we good for something, anything at all?

Ori Nilmo

No wonder. Of all these years of operating I've never seen any tangible and fiscal benefits from logging operations in the rural areas where they operate apart from royalty payments lo traditional land and resource owners.
Thank you Oakland Institute!!
I hope our government start regulating and monitoring the logging industry more stringently

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