Honey queries PNG Government's tax hike on logs
The President of the Forest Industries Association, Mr Tony Honey, today seriously called into question the logic and basis for the Government announcing an effective 50% increase in the log export tax in the 2017 Budget.
Export prices are currently at a depressed level and export demand remains weak. International market analysts are forecasting continued weak markets throughout 2017 with no significant improvement until 2018-19 and this is dependent on economic recovery and stability in China, our largest export market.
“The apparent conflict between statements made by the Chief Secretary on the tax increase are confusing and will lead to an immediate collapse in investment and job creation in the forest sector. How is it possible to say that ‘there is no point in increasing taxes when we are going through financial difficulties’ and then, that we are ‘looking at that, log export taxes, closely to ensure that tax (increase) does not impact on the industry in a negative way’. Of course a doubling of the turnover tax, that’s what export tax is, will have negative impacts on the industry most certainly and we are seeing this already”, he said. “Cutting any companies cash flow by 50% during a market depression is a recipe for disaster. Many forest industry participants are already planning for a significant scale down of operations and staff retrenchments beginning the 1st January”.
Mr Honey went on to say that “and contrary to Government claims that this tax increase will boost downstream processing, it will have the opposite effect. Our largest processing factories are in our logging concessions in many cases recovering low grade logs, therefore cutting back logging as a result of punitive taxes will have a flow on effect and reduce domestic processing !!!. If the logging industry closes, where will the factory log input come from?”
“And further, the Budget Second Reading Speech refers to the tax increase applying to old growth natural logs but what the Government has done is apply it to plantation logs as well. This action by the Government effectively ends forest plantation development in PNG, why?”
Mr Honey concluded by saying that “there is no logic nor consistency in what the Government has done and what it says are its policy aims for the forest industry. Forest policy and its taxation framework are an ad-hoc mish mash of competing agendas, aims and objectives and until there is some sound economic and market analysis to underpin Government actions, continuing development of the forest sector in any aspect is futile.”
Mr Honey went on to say that ”no consultation with the industry took place prior to the government implementing its tax changes for the 2017 budget and as a consequence not only are the industry the losers so are the landowners !!!!! “” No other industry provides income through royalties, premiums and infrastructural development throughout the remotest parts of the country as a whole like the timber industry does, this is what is at stake today!!”’