KUALA LUMPUR (Feb 17): Malaysian logging firm Rimbunan Hijau Group appears to be complicit in “massive tax evasion and financial misreporting” in Papua New Guinea, a US-based think tank says.

The Oakland Institute in its report titled The Great Timber Heist: The Logging Industry in Papua New Guinea said Rimbunan Hijau Group's 16 subsidiary companies in the country were suspected of under-reporting their profit for over a decade.

From 2000 to 2011, the financial records of Rimbunan Hijau Group's 16 companies revealed a total of 111 years of losses versus 33 profitable years, the report said.

This was despite Papua New Guinea's forest industry raking in an annual revenue of between US$200 (RM841) and US$300 million, it said.

With little to no profit declared, Rimbunan Hijau Group did not have to pay the 30% income tax on profit that the Papua New Ginuea government imposes on businesses, said the report.

Rimbunan Hijau Group had also accumulated around US$32 million in tax credit in just seven years, it said.

“Through transfer pricing – underpricing exports and overpricing expenses, the logging industry is able to evade paying hundreds of millions of dollars in taxes – vitally needed revenue for the country,” said Frederic Mousseau, author of the report.

Rimbunan Hijau Group in an immediate response the report was baseless and inaccurate, and called it an attack by “western anti-forestry activists”.

The practice of underpricing exports involves a buyer – in agreement with the seller – “officially” paying a lower price than the real cost of the goods, said the report.

It said there were strong reasons to believe that logging companies in Papua New Guinea were doing this.

“Export prices declared for Papua New Guinea timber are significantly lower than those declared by other major exporters of tropical logs – except Malaysia, which has similarly low prices,” said the report.

Meanwhile, overpricing expenses is done by overvaluing operational expenses so their costs exceed the profits made, it said.

“Companies belonging to the same group are able to charge each other an artificially high price for goods, equipment, and services, thereby increasing the sister company’s operational expenses.

“The charges can be high enough that the company’s expenses end up greater than its revenue, thus allowing the company to declare an operational loss for the year.”

The report said its findings called for relevant authorities such as Papua New Guinea’s Internal Revenue Commission to take action to defend the interests and rights of Papa New Guinea citizens.

"Effective legal action to protect customary land rights, stop the appropriation of resources, and prevent human rights violations of the citizens is lacking.

"The question is, will the government of Papua New Guinea take action to stop illegal activities, tax evasion, and other wrongdoings of the logging industry?" said the report.

However, when contacted, Rimbunan Hijau Group dismissed the Oakland Institute's report as baseless and inaccurate.

Corporate policy manager Axel Wilhelm said large-scale forestry companies in Papua New Guinea sometimes operated at a loss for periods due to volatile international prices and operational cost pressures.

“Rimbunan Hijau Group meets all its legal obligations, including payment of taxes, duties, levies and royalties,” he told The Malaysian Insider.

“This report is just the most recent groundless attack by western anti-forestry activists who have been making exaggerated and inaccurate claims about forestry in Papua New Guinea for nearly 20 years.”

He said the Oakland Institute appeared to want to sustain a foreign-funded campaign to halt commercial forestry in Papua New Guinea.

“This campaign has failed. Its previous sponsor, Greenpeace, has shut shop and moved out of Papua New Guinea.”

He added that recent satellite remote sensing provided by the Japan International Cooperation Agency showed there was no truth to claims Papua New Guinea's forests were being decimated.

“In fact, 80% of the country remains forested,” he said.

He assured that that Rimbunan Hijau would remain in Papua New Guinea “for the long haul”, adding that successive governments had applauded them for their major investments in the country.