07/02/00 -- Major Logging Tax Racket Deprives PNG of Revenue

***********************************************

PAPUA NEW GUINEA RAINFOREST CAMPAIGN NEWS

Major Logging Tax Racket Deprives PNG of Revenue

***********************************************

Forest Networking a Project of Forests.org

http://forests.org/ -- Forest Conservation Archives

http://forests.org/web/ -- Discuss Forest Conservation

07/02/00

OVERVIEW & COMMENTARY

Corruption within the Papua New Guinean industrial log export

industry is of epidemic proportions. Following is a piece on

corruption in Madang Province's timber industry, which I know from a

decade of experience is rife with illegal and corrupt activities.

The success or failure of significant new Australian and World Bank

aid projects coming on line, including loans in the Bank case, will

depend upon to what extent they go beyond trying to "reform" the

current industry (this has been tried and failed with Barnett

Inquiry, TFAP, NFCAP, 1st moratorium, etc.), and instead open up

forest management to include a variety of activities; including

different scales of activity, levels of processing, ownership, etc.

The current Malaysian dominated log export industry is unable to be

reformed and should be abolished and dismantled. If these aid

projects simply extend the life of the current tragically flawed

industry, they will have failed.

g.b.

*******************************

RELAYED TEXT STARTS HERE:

ITEM #1

Title: PM to report tax racket

Date: June 29, 2000

By: NEVILLE CHOI

PRIME Minister Sir Mekere Morauta is expected to report on allegations

of a major tax avoidance attempt by Internal Revenue Commission (IRC)

officials and a foreign logging company in parliament today.

Sir Mekere's response to the allegations will be based on a brief

provided by Internal Revenue Commissioner-General David Sode.

The allegations were introduced in parliament on Tuesday when

Kandrian-Gloucester MP Peter Arul raised questions on what he

described as a "huge tax racket" in the Madang province involving

prominent politicians and bureaucrats working within the IRC.

According to Mr Arul, two weeks ago, a foreign logging company had

brought a shipment of machinery into the country to initiate the

downstream processing of timber in the Bogia area of the Madang

province.

The Kandrian MP alleged that whilst the machinery was being held at

the Madang wharf, IRC tax officials had attempted to exempt the

company from having to pay tax duties.

He said the officers from the IRC were sacked for their actions.

Following Mr Arul's series of questions, and allegations about the tax

racket, Bogia District MP Bernard Mollok revealed in parliament,

events surrounding the alleged tax evasion attempt by the foreign

company and matters relating to conflicts between the foreign logger

and landowners.

Mr Mollok also told parliament that the machines that were shipped

over to Madang had been delivered to an area outside of the intended

area of operations. Highlighting other factors of the company's

intended business, Mr Mollok questioned Sir Mekere and Forestry

Minister Michael Ogio on whether the matter was being looked into.

Sir Mekere, in answering the questions raised by Mr Arul earlier in

the session, told parliament he would look into the allegations of

possible abuse by tax officials and politicians and report back to

parliament.

The Independent understands that the brief on the allegations was to

go before cabinet yesterday evening and that there was a strong

possibility that Sir Mekere would present something in parliament

today in relation to the issue.

The exact nature of the racket is yet to be established, but reliable

documents made available to The Independent allege that the logging

company used authorities at the provincial level to underpay import

duties and storage charges on the machinery held at the Madang wharf.

The documents also state that the details on duty payments and tax

evasion were reported to the office of the Commissioner General who

had successfully tracked down the equipment and brought it back to

Madang.

According to the documents, there were several other government

institutions involved in allowing the company to remove its equipment

from the Madang Port without full payment of the required fees.

In a letter directed to Sir Mekere and Mr Ogio, Mr Mollok listed

persons he believed were involved in the matter.

He also recommended that:

* A logging licence awarded to the foreign logger be terminated

because of corrupt practices;

* The manager of the foreign logging company be deported out of PNG

for his involvement in the alleged deals; and

* Those involved in the case of underpayment of import duties and

removal of plants and machines from the Madang wharf be referred to

the police.

* Mr Ogio also told parliament that both he and the prime minister

were aware of the letter and reassured Mr Mollok and the house, that

the matter would be dealt with accordingly.

Mr Sode, when contacted yesterday declined from making any comments on

the issue other than saying that Sir Mekere would be making a

statement on the whole matter today in parliament, and confirming that

no more than five officials and not ten as mentioned in parliament,

allegedly involved in the "racket" had been terminated.

ITEM #2

Title: Public servants must put the interest of the country ahead of

Their own

Date: June 29, 2000

By: Editorial board opinion

GOOD on the Internal Revenue Commission for sacking those officers

allegedly responsible for attempting to exempt a foreign owned company

from having to pay tax duties.

Here, the saying "better late than never" is timely. Who knows how

long this has been going on for before they were caught in the act and

paid for their actions. One can only guess how the officers concerned

may have benefitted from this scrupulous deals.

However, now that those responsible have been sacked, authorities must

ensure that any others that are still remaining be also given their

marching orders.

Because of the actions of such public servants, the government and the

country as a whole is missing out on huge sums of money which if it

did receive could be channelled to further developing the country and

its people.

People often ask how come Papua New Guinea which is blessed with rich

and plentiful natural resources, is still a poor country. The question

seems to be: Where are all the monies that have been earned from

cutting down our forests, from the sale of our gold, copper, etc.

It is through such actions which can be seen as selling out our

country that the vast majority of the population are left high and

dry.

It is not only to do with the logging of our forests. Such practices

are also known to happen in the other industries as well.

Prime Minister Sir Mekere Morauta must look into this scandal

immediately and ensure that those responsible be dealt with. Reports

that the logging company used authorities at the provincial level to

underpay import duties and storage charges is very bad. If the very

people who are tasked to carry out the government's tasks are doing

the opposite, then who can the people turn to.

It's no wonder the "little" people who were affected by this situation

kept on bringing their plight to the attention of the media. They

could not approach their provincial authorities because they were

allegedly involved.

The government must take a tough stand against persons involved in

such practices. The sacking of those concerned is a move in the right

direction.

A thorough investigation must be carried out to ensure that the

remaining officers are in no way linked to this scrupulous deals.

Every attempt must be made to discontinue this acts that cost the

country huges sums of money, funds which the country badly needs.

###RELAYED TEXT ENDS###

This document is a PHOTOCOPY for educational, personal and non-

commercial use only. Recipients should seek permission from the

source for reprinting. All efforts are made to provide accurate,

timely pieces; though ultimate responsibility for verifying all

information rests with the reader. Check out our Gaia's Forest

Conservation Archives & Portal at URL= http://forests.org/

Networked by Forests.org, Inc., gbarry@forests.org