The PNG Forest Industries Association (FIA) has objected to the proposed changes to the log export tax, announced in the National Budget last Tuesday.
Treasurer Patrick Pruaitch, in tabling the National Government’s money plan in Parliament, had announced the reintroduction of the progressive log export tax on unprocessed old growth logs to capture the resource rent of varying log species. [restrict]
The treasurer said this tax measure was a deliberate policy measure to encourage downstream processing facilities and for additional spin-off economic activities. He said government was looking to raise up to K620 million (US$195 million) from this and the other tax measures.
However, PNGFIA executive officer Bob Tate says if put into effect, these changes would put at risk a major national industry, greatly reduce government revenue and foreign exchange earnings, which exceeded K1billion (US$315 million) in 2015.
He said this could result in as many as 15,000 Papua New Guineans losing their jobs.
“The average free on board (FOB) sales price for exports of logs from PNG is K304 (US$94 million) per cubic metre (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 USD$12 per m3 as well as corporate tax on any profits made. As a result, profit margins for forestry operators are razor-thin.]
“The proposed changes 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 over 50 per cent and returns to the operators to cover all operating costs will fall by 25 per cent. Mr Tate said the policy would create a disincentive for national exporters to export goods.
“The industry would ask why it has been singled out for such harsh treatment in the Budget compared to other sectors of the economy “If PNG is to improve the state of the economy it would be advisable to reduce or abandon the export tax applied to round logs,” Tate said.
SOURCE: POSR COURIER/PACNEWS [/restrict]