Log tax hike decried


THE PNG Forest Industries Association is concerned about the proposed changes to the log export tax announced in the national budget recently.
President Bob Tate said if put into effect, the changes would put at risk a major national industry, greatly reduce government revenue and foreign exchange earnings – which exceeded K1 billion last year – and could result in as many as 15,000 Papua New Guineans losing their jobs.
He added that more than 300,000 landowners and members of Integrated Landowner Groups who currently benefitted from direct payments from forest projects could lose more than K42 million per year in income.
“Without a sustainable economic activity in the rural areas, all these services become uneconomic and will cease,” Tate said.
“The average FOB sales price for exports of logs from PNG is US$96 (K304) per cubic meter (m3).
“The current tax rate for exports of round logs is 28.5 per cent of FOB value.
“On top of this, timber exporters pay royalties and development levies to landowners that total approximately US$12 (K38) per m3 as well as corporate tax on any profits made.
“As a result, profit margins for forestry operators are razor-thin.”
He said the proposed change would effectively increase the tax on exported logs from 28.5 per cent to 43 per cent and as much as 90 per cent if export markets and commodity prices recover in future.
“These rates of tax are unsustainable and will result in widespread industry closure,” Tate said.
Under the budget proposed rates, taxes paid by the forest industry will increase by more than 50 per cent.
This will result in large parts of PNG’s forestry sector becoming non-viable.
“As a result, tens of thousands of families would lose their royalty incomes, hundreds of communities would lose the aid posts, school facilities, roads and bridges that are paid for by forestry operators, and the 15,000 Papua New Guinea forestry workers would risk losing their jobs,” Tate said.
He said the PNGFIA “strenuously objects to this proposed Bill, and to the fact that the PNG Forest Authority was not consulted on these proposed changes”.

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