Global Witness: Liberian Gov’t ‘Secretly Tax Waiver’ Threatens Forestry Sector

Global Witness: Liberian Gov’t ‘Secretly Tax Waiver’ Threatens Forestry Sector

Monrovia - A US$13 million secret tax waiver to logging companies by the Government of Liberia would severely threaten forest communities and undermine the efforts to mitigate climate change in the country, says Global Witness (GW).

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“The law knocks a massive hole through Liberia’s budget. It also undermines the country’s efforts to mitigate climate change through preserving its forests and managing them for the benefit of its people.” - Global Witness

The UK-based international NGO and Tropenbos International, which works alongside GW and other international NGOs in supporting Liberia to improve policy and practice in forest law enforcement, governance, and climate mitigation, say the move has “undone 15 years of reform” in the forestry sector.

Signed by President Ellen Johnson Sirleaf, the tax break seeks to, under the guard of the law, offer protection and subsidy for logging companies at the expense of Liberians, GW says.

The law, known as the Forest Industrial Development and Employment Regime Act, was passed in October 2017 but was only made public last week as preparations for the runoff elections reach its penultimate stage.

 “The law knocks a massive hole through Liberia’s budget. It also undermines the country’s efforts to mitigate climate change through preserving its forests and managing them for the benefit of its people,” GW said Tuesday in a statement.

Despite no official response from government to the GW’s concern, it has argued that tax-breaks help keep investments afloat in the country and sustain employments for Liberian workers.

David Young, campaign leader at GW says it is “a disastrous move, which puts back efforts to halt climate change, whilst also massively short-changing the Liberian people.”

The President Johnson-Sirleaf’s sanctioned “economically-irrational” tax holiday for loggers would also drained the future of Liberia’s forests, according to GW. The move is also sparking concerns over the country’s dependence on foreign aid to protect its forest.

It will surprisingly take effect amid the heavy investments made by the United Kingdom, Norway, European Union, and the United States in reforming the forest sector and supporting the country’s poor finances.

And GW is now calling for western countries to halt financial aids to the West African nation as a means of pressuring the Johnson-Sirleaf administration to reverse its tax holiday laws for loggers.  

“It is only right that partners providing budget support to Liberia and aid to its forest sector should now suspend that support until the law is overturned,” Young said.

Unlike writing off the US$13 million for these logging firms, the new law also waives companies’ taxes for the next three years and the companies will be able to claim ill-defined “investments” accrued between 2016 and 2020 against this tax bill.

Donors contribute heavily to improving the rule of law in the forest sector and fighting climate change, including through a US$150 million agreement between the governments of Liberia and Norway, while the EU supports the country’s forestry development authority and provided fiscal budget support of US$128 million between 2011 and 2015.

GW says the prevailing “dismal state of companies’ past “investments,” and the “persistently poor delivery on their obligations to forest communities”, makes it impossible for the tax waiver scheme to benefit the interests of the Liberian people.

It says - “There is no logical explanation to subsidize loggers who have persistently broken the law and now are failing even to pay the taxes they owe”.

Liberia is one of the world’s poorest countries, with a 2017-2018 budget put at US$563 million.

And the UK-based advocacy group, well-known in Liberia for unearthing the infamous Sable Mining crooked dealings prompting the prosecution of top government officials, argues that tax waiver would have made a huge difference to Liberians despite the extent of high-level corruption.

Young added: “The choice is a stark one for Liberia’s donors: why should they spend millions helping Liberia, only for the Liberian government to give millions back to predatory logging companies? President Johnson Sirleaf should immediately issue an Executive Order overturning the law. Until she does, funds provided by the UK, Norway, EU and US for the forest sector and budget support should be suspended.”

Over the past year, the government, its international partners, and NGOs have increased pressure on companies to pay taxes they have so long owed, but it appears, however, that the government has conceded to under-capitalized cut-and-run loggers, GW added.

Figures released in the GW report put the total indebtedness of the 19 operational logging companies to the government, as of 30 October 2017, at almost US$ 25 million, out of which over US$ 13 million is Bid Premiums.

The tax reform opens a debate over its underlying intent and target beneficiary especially as the curtains fall on the current administration. The inklings are also emerging from a February 2017 report that accused top government officials of shielding logging firms they own.

In another GW Report released earlier this year, former Speaker of the House of Representatives, J. Alex Tyler and representatives Ricks Toweh and Moses Kollie were named as owners of logging companies that “have lied, cheated and stolen from the Liberian people through illegal logging activities”.

Real ownership information of six contracts including firms owned by Toweh, Kollie, and Tyler were not reported to LEITI for its 2015 Beneficial Ownership Report.

LEITI - Liberia Extractive Industries Transparency Initiative is a global coalition of governments, companies and civil society working together to improve transparency and accountability in the management of revenues from natural resources.

Based on the first report, there were also warnings from GW that if those allegations were unaddressed, that would have undermined the important work of government and its partners to ensure Liberia’s forests do not again fuel conflict and corruption as in the case of infamous incidents during the Charles Taylor’s era when shady logging operations fueled smuggling of weapons into the country.