Tate: Log Export Tax a Failed Policy

By: PNG Business News January 27, 2021

The round log export tax was a failed policy.

According to Forestry Industry Association president Bob Tate, the current tax regime (50.2 per cent) had affected businesses which resulted in a decline of US$83 million (K288.42mil) from January to November in 2020.

In 2020, royalty payment to landowners also saw a decline of K16 million because of the decrease in the production of 20 per cent by firms due to the high tax. As a result of the mills and processing sites closing its operations, an estimated 8,000 local and 600 foreign workers were booted out of their jobs.

Wages lost were figured to be around K4 million.

Tate said that in 2020, government revenue went up to K383,465,238 million from K379,011,840 million in 2019. He added that unfortunately, the industry will still go down this year.

“It’s going to get worse, not better,” Tate said. “A lot of companies including these processing factories are all shut, all finished and they are not going to reopen. It started last year and will continue this year. The impact of the tax is slowing shutting things down.”

Because of the health crisis, Tate said that the demand for the processed products of the country had gone down and will only go up when the economy improves.

Meanwhile, PNG Forestry Authority managing director Tunou Sabuin said that the forestry industry could only recover if the tax goes from 50.2 per cent back to 28.5 per cent. Because of the high log export tax regime and uncertainty in the investment world with policy changes, the industry was not looking good.

“There is nothing much that the Government of PNG can do about the pandemic as it relates to trade in timber,” Sabuin said. “But it can make a decision on the reduction of log export tax to support the forest industry survive.”

In taxes, the industry contributes on average K334.3 million per year, said the organisation. From 2015 to November 2020, taxes paid were K2 billion.

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