Taxes and fees
The FIP is responsible for paying all required taxes, royalties, landowner premiums, fees, project development benefits and levies as defined under the specific forest resource allocation arrangement. The PNGFA’s Provincial Forestry Offices are responsible for collecting revenues and issuing receipts. Logging Royalties are paid according to the ‘Procedures for the Identification Scaling and Reporting on Logs Harvested from Natural Forest Logging Operations’. The level of the royalties is determined by the Minister for Forests and its level is determined per species. The royalties are paid to the PNGFA that acts as trustee on behalf of landowner groups. In addition, there is a smaller Reforestation Levy. Other premiums that are paid in cash or kind to the landowner may also apply.
The FIP is also responsible for paying the correct export duties and levies as required by the PNG Customs Service and any other regulated agency fees. Export tax and levies do not apply to plantation logs or processed wood products. Under PNG’s ‘Procedures for Exporting Logs’, the SGS PNG Ltd company (SGS) is contracted by the PNG Government to operate a Log Export Monitoring System. This involves checking that log export volumes and species are correctly declared and that all export tax and levy calculations are correct. Processed wood products are exported and also need an Export Permit but no export tax or levy is charged and SGS is not required to inspect.
The Log Export Tax is the principle tax for export logging companies, which is paid to the Internal Revenue Commission (IRC). The re-introduced tax on log exports is progressive, with increasing shares for more valuable timber. In practice, it means that the minimum log export tax is 25%, gradually increasing to 59% according to the log value. The document used to calculate these taxes is the Export Entry for Customs, which is based on the Inspection Report realized by SGS after ship loading. Poles in the rough and squared logs also fall under this tax regime. Under the PNG Government’s 2020 budget, the Log Export Tax has been raised from 35% to 59% which has led to a recent decline in average monthly log volumes. The Log Export Development Levy (LEDL) exists for projects in the affected districts, defined at 8.00 Kina per cubic meter in the ‘Forest Bill 2006’, except for plantation logs. This levy is paid to Customs at the time of export.
In January 2019, local newspapers further reported that the PNG Government was working on a proposed law that would put a tax on logging companies that repeatedly report losses, and for that reason are exempt from income taxes. No official confirmation of this has yet been found.