The Great Timber Heist, Illegal Logging and Tax Evasion in Papua New Guinea

Frédéric Mousseau

Papua New Guinea's rainforest, the third largest in the world, is being plundered by illegal logging. Frédéric Mousseau of the Oakland Institute presents the findings of a report that exposes the industry’s systematic tax evasion, depriving the country of revenue while destroying its natural resources.

The destruction of one of the most biologically diverse ecosystems on Earth – home to more than six per cent of the planet’s biodiversity with 20,000 species of higher plants and more than 2,000 tree species – isn’t only a disaster for all but also a catastrophe for Papua New Guineans, whose livelihoods and culture are directly threatened. 83 per cent of its population lives in rural areas, mostly in small communities of a few hundred villagers who maintain an intimate relationship with the land and natural resources. With their traditional lifestyles based on small-scale agriculture, hunting, fishing and gathering, people are highly dependent on the forests for their food and medicines, soil and watershed protection, materials for construction as well as cultural activities and customs.

Papua New Guinea’s timber industry: the great heist

Papua New Guinea (PNG) has doubled its export of tropical timber to international markets in just ten years, contributing three to four million cubic metres of timber every single year since 2010. The country became the world’s largest exporter of tropical wood in 2014, surpassing Malaysia, which had held the top spot for the past several decades. Over 90 per cent of PNG’s timber is exported to China.

Responding to the concerns raised by NGOs and scientists, the industry and its proponents argue that logging contributes to the country’s development through the tax revenue the government receives on log exports. However, research by the Oakland Institute reveals that most logging companies barely declare any profits. The think tank’s latest report, The Great Timber Heist-Continued: Tax Evasion and Illegal Logging in Papua New Guinea, analyses the activities of 16 subsidiaries of PNG’s largest log exporter, the Malaysian Rimbunan Hijau (RH) Group.

According to their records, these companies have doubled their financial losses in just six years while increasing their exports of tropical timber by over 40 per cent. A puzzling finding of the research is that the more these companies harvest and export timber, the more money they declare in losses. Not only do they almost never pay any income tax, but their continued losses allow them to accumulate an astounding volume of tax credits – making it likely that they won’t pay any income tax for years to come.