Logging in Papa New Guinea Rife With Tax Dodging

February 17, 2016 Taxation in Papa New Guinea

offshore jurisdictionsPORT MORESBY – Despite being one the most prolific exporters of wood in the world, Papa New Guinea is collecting virtually no income tax from loggers claiming to be running at continued losses.

In a new report released on February 16th the independent US-based policy think tank Oakland Institute has claimed that the logging industry in Papua New Guinea is rife with tax evasion, with companies not paying any income taxes over the course of several years.

Papa New Guinea is considered to have one of the richest forest and logging areas in the entire world, and as of 2015 has the highest level of exports of tropical Roundwood in the world.

However, despite the high level of demand and exports of wood from Papa New Guinea, the 15 largest logging companies in the country are continually reporting that their operations are at a net loss, and are subsequently not paying any income tax.

Over the last 12 years, only one logging company saw a greater number of years with gains then losses, and one other company saw an equal number, while all other operators saw a much greater number of years with net losses.

The researchers of the Oakland Institute claim that the continued net losses can be attributed to mis-pricing and aggressive transfer pricing practices, with logging companies continually under-reporting the price of their exports, while inflating their inflation to mask any profits made.

It is estimated that if the logging companies did not engage in the tax avoidance mechanisms the government could see the collections of tax revenues rise by more than USD 100 million per year.

Photo by gus_estrella