The erosion of the tax base within the logging sector has emerged as a formidable challenge for revenue collection.
Log exporting companies, through adverse transfer pricing schemes, have deftly reduced the taxable base, thus significantly diminishing their tax obligations.
Corporate Income Taxes, export levies, royalties, and other fiscal impositions have all been calculated based on this reduced foundation. This disconcerting reality has been substantiated by the first results of the IRC's ongoing audits within the logging sector.
In response to these pressing concerns, the Internal Revenue Commission (IRC) stands resolute in its pursuit of equitable and judicious taxation measures, fostering both compliance and a level playing field.
Commissioner General Sam Koim, during the recent signing of a Memorandum of Understanding (MOU) with the PNG Forest Authority, highlighted the paramount importance of understanding the incentives and disincentives that drive operators within the logging industry to engage in audacious tax evasion strategies.
The Commissioner General emphatically underscored the imperative to "tax right, not tax more," ensuring the collection of a fair and rightful share from this vital sector.
His remarks exemplify the IRC's steadfast commitment to striking a harmonious balance between revenue generation and fostering a conducive business environment.
He further expounded, stating, "Effective tax policies will curb tax evasion, safeguard the state's interests, and establish an equitable landscape for enterprises."
“It is not in our interest to overtax and kill an industry. It is in our (IRC’s) interest for businesses to continue to be alive in business. All we are asking for is a fair share of their taxes in accordance with law.”
Furthermore, the initial audit findings bear testimony to the IRC's amplified capacity to access information previously cloaked beyond reach in other tax jurisdictions. This positive development will be further reinforced by the exercise of the State's marketing and selling option under the Forestry Act of 1991, as discussed during the MOU signing.
This empowerment will enable the State to ascertain if log exporters are deliberately undervaluing our precious timber resources to evade their tax obligations.
“I believe that if we can adequately pluck the revenue leakages such as transfer pricing, we can then explore whether the increases in the taxes in the logging sector are sustainable. Of course, that again has to be considered in light of the Government’s overall plan for downstream processing,” Koim added.