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September 22, 2021
Featured News Papua New Guinea

Advocacy Group Calls for a Ban on Tax Evading Logging Companies

By Rayon Lakingu

The Forest Authority must stop aiding and abetting logging companies identified by the IRC as defrauding the State and landowners by evading taxes, says community advocacy group ACT NOW!

Campaign Manager, Eddie Tanago said if logging companies are unlawfully evading taxes then the Forest Authority and the Minister must act to stop these companies from accessing even more forests to feed their criminal activities.

The call follows Internal Revenue Commission’s boss, Sam Koim, slamming the logging companies for what he described as their “pillaging” of PNG’s forests.

Koim says the companies are guilty of “egregious” transfer pricing, “entrenched” tax evasion and “deceptive behavior”. 

According to Koim, logging companies are evading taxes by under-declaring their real incomes and hiding receipts in offshore secrecy 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 refunds of GST. 

And IRC is currently auditing 20 foreign owned logging companies and expects to be laying criminal charges, but there needs to be “better monitoring” of the “high-risk” sector.

The export of Kwila logs were given as an example of the type of transfer pricing logging companies are engaging in. 

He says that when Kwila logs are exported from PNG to China the value declared by the logging company might be just US$110.

However the logging company is not selling the logs direct to the buyer in China, but to one of its own overseas subsidiaries, often registered in a secrecy haven.

That associated company then on-sells the logs to China for a much higher price, such as US$500.

The offshore company then pockets the $390 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.

Tanago says, If the logging companies were under-declaring their value by US$390, as Koim claims, then the total under-declaration would have been US$110 million or around K400 million. 

He said, that is K400 million potentially lost on just one species of log exports in just one year”. 

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