| ACT NOW!
PORT MOREBY - The Forest Authority must stop aiding and abetting logging companies identified by the Internal Revenue Commission as defrauding the State and landowners by evading taxes.
Fraudulent practices around log exports from PNG over the past 20 years could have the cost the country as much as K21 billion.
If logging companies are unlawfully evading taxes then the Forest Authority and the Minister must act to stop them accessing even more forest to feed their criminal activities.
Internal Revenue Commission boss Sam Koim has slammed the logging companies for “pillaging” Papua New Guinea’s forests.
He says the companies are guilty of “egregious” transfer pricing, “entrenched” tax evasion and “deceptive behaviour”.
According to Koim, logging companies are evading taxes by under-declaring their real incomes and hiding receipts in secret offshore jurisdictions.
They are also paying “very minuscule” amounts of payroll taxes, despite employing a large workforce, and are draining the government of scarce revenues by claiming large GST refunds.
The IRC says it is currently auditing 20 foreign owned logging companies and expects to be laying criminal charges, but admits there needs to be “better monitoring” of the “high-risk” sector.
For too long the Forest Authority has failed to properly monitor the logging industry and has turned a blind eye to illegal and unsustainable logging, including in areas deemed unlawful by a Commission of Inquiry.
But the new analysis from the IRC cannot be ignored, the Forest Authority must stop issuing new logging permits, extensions and renewals to these companies.
If the Authority does not act then it will be knowingly and wilfully aiding and encouraging the companies' criminal activity.
Commissioner-General Sam Koim has given the export of Kwila logs as an example of the type of transfer pricing he says logging companies are engaging in.
Koim says that when Kwila logs are exported from PNG to China, the value declared by the company might be just K400.
However the logging company is not selling logs direct to the buyer in China but to one of its own overseas subsidiaries, often registered in a secret haven.
That associated company then on-sells the logs to China for a much higher price, perhaps K1,750. The offshore company then pockets the K1,350 price difference, depriving PNG of taxes and royalties and allowing the company to constantly claim a loss on its local operations.
In 2020, 282,000 cubic metres of Kwila logs were exported from PNG, according to export monitoring company SGS.
If the logging companies were under-declaring their value by K1,350, as Koim claims, ACT NOW! has calculated the total under-declaration would have been around K400 million.
“That is K400 million potentially lost on just one species of log exports in just one year”.
Log exports from PNG over the past 20 years total some 60 million cubic metres. If the average price was being under declared by just K350 a metre, that amounts to a K21 billion fraud.
ACT NOW says the government must step in and deny logging permits or permit extensions until the company involved has been given a clean bill of health by the Internal Revenue Commission.
If the Forest Authority, Board and Minister do not act, they are simply encouraging and assisting the logging companies egregious and criminal behaviour and their pillaging of our forests, as described by the IRC.