Tax Avoidance by Logging Companies Costing PNG More than $100 Million a Year, Report Says

Jemima Garrett

Tax avoidance by foreign logging companies is costing Papua New Guinea hundreds of millions of dollars, according to a new report by the Californian-based Oakland Institute.

The revelations come as PNG faces its worst cash flow crisis this century with health and education services not receiving expected funding and politicians and public servants not being paid on time.

The Oakland Institute investigated the financial and taxation records of dozens of firms, including the Malaysian giant Rimbunan Hijau (RH).

It found logging interests are using groups of linked companies to shift profit offshore, robbing PNG of tax revenue.

"Looking at the losses in terms of income tax and export duties it is certainly over $100 million a year," Oakland Institute policy director Frederic Mousseau told Pacific Beat.

The report, called The Great Timber Heist, found most of the logging industry in PNG has declared little or no profit, in some cases for more than a decade.

It pointed to transfer pricing — the shifting of profits offshore by underpricing of exports to sister companies or overpricing of charges for consultants or services.

At a single logging site in Pomio, in East New Britain Province, the Oakland Institute found a local subsidiary of Rimbunan Hijau (RH), Gilford Ltd, listed in its accounts 15 other RH companies.

"It is quite alarming," said Eddie Tanago, spokesperson for PNG activist group Act Now.

"The logging companies are destroying the livelihoods of the local people by taking over the land and according to the report many claim they make losses, year after year… and yet they remain in business.