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Putting a Halt to the Great Timber Heist in Papua New Guinea

March 3, 2016
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Lowy Interpreter

Frederic Mousseau

In a new report released last month, The Great Timber Heist: The Logging Industry in Papua New Guinea, the Oakland Institute exposed massive tax evasion and financial misreporting by foreign logging companies, allegedly resulting in the nonpayment of hundreds of millions of dollars in taxes in Papua New Guinea (PNG).

A puzzling finding of this research is that despite decades of operations in PNG, and the country today being the largest exporter of tropical timber in the world, logging companies barely declare any profit. 

The financial filings of many logging firms report losses year after year.This is the case for 16 subsidiary members of the largest logging firm in PNG; the Malaysian multinational Rimbunan Hijau Group on which the report focused specifically. These companies, working mostly at a loss, have accumulated over US$30 million of tax credit in just seven years. This will allow them to not pay the 30% income tax on their profits in the years to come. Why are they still in business if they don't make profits? This is a fair question to ask. The question is even more relevant since the Government has failed to take action following the 2013 report of the Commission of Inquiry into Special Agricultural and Business Leases. The Commission found widespread fraud, corruption and lack of proper consultation with the local communities , the customary owners of the land where logging is taking place. 

Commenting on the report in the media, PNG's Forestry Minister, Douglas Tomuriesa, denied any wrongdoings. He declared that the Government is able to monitor log exports thanks to the involvement of an international verification company, SGS, and that logging companies do pay significant amounts of export duties. The Oakland Institute research acknowledges that the exports are monitored and that logging companies do pay export duties and levies, which constitute the main source of forest revenue for the Government.