Malaysian Logging Firm Evading Taxes in Papua, Says US Think Tank
KUALA LUMPUR (Feb 17): Malaysian logging firm Rimbunan Hijau Group appears to be complicit in “massive tax evasion and financial misreporting” in Papua New Guinea, a US-based think tank says.
The Oakland Institute in its report titled The Great Timber Heist: The Logging Industry in Papua New Guinea said Rimbunan Hijau Group's 16 subsidiary companies in the country were suspected of under-reporting their profit for over a decade.
From 2000 to 2011, the financial records of Rimbunan Hijau Group's 16 companies revealed a total of 111 years of losses versus 33 profitable years, the report said.
This was despite Papua New Guinea's forest industry raking in an annual revenue of between US$200 (RM841) and US$300 million, it said.
With little to no profit declared, Rimbunan Hijau Group did not have to pay the 30% income tax on profit that the Papua New Ginuea government imposes on businesses, said the report.
Rimbunan Hijau Group had also accumulated around US$32 million in tax credit in just seven years, it said.
“Through transfer pricing – underpricing exports and overpricing expenses, the logging industry is able to evade paying hundreds of millions of dollars in taxes – vitally needed revenue for the country,” said Frederic Mousseau, author of the report.
Rimbunan Hijau Group in an immediate response the report was baseless and inaccurate, and called it an attack by “western anti-forestry activists”.
The practice of underpricing exports involves a buyer – in agreement with the seller – “officially” paying a lower price than the real cost of the goods, said the report.
It said there were strong reasons to believe that logging companies in Papua New Guinea were doing this.
“Export prices declared for Papua New Guinea timber are significantly lower than those declared by other major exporters of tropical logs – except Malaysia, which has similarly low prices,” said the report.
Meanwhile, overpricing expenses is done by overvaluing operational expenses so their costs exceed the profits made, it said.
“Companies belonging to the same group are able to charge each other an artificially high price for goods, equipment, and services, thereby increasing the sister company’s operational expenses.
“The charges can be high enough that the company’s expenses end up greater than its revenue, thus allowing the company to declare an operational loss for the year.”