By: Benjamin Sims
There have been several interesting pieces of information in the media recently that have highlighted the importance of international tax revenue in terms of development. We have seen documentaries like the recent Four Corners on East Timor, and also the leak from Papua New Guinea Mine Watch on how mining companies are avoiding tax in PNG.
The Timor documentary and example of PNG tax avoidance demonstrate that for Melanesia the amounts international companies are not paying in tax might eclipse even the aid money they receive. The PNG leak, for example, explains how a South African mining company can get away with paying a tax of just three per cent rather than the official rate of 30 per cent.
This is not a new issue. An ex-government official from PNG recounts the following story:
In the nineties, PNG officials checked the Stock Market declaration of Rimbunan Hijau. At the time, the largest logging company in PNG. This company … never [paid] income tax in 20 years. More shockingly, their stock market record showed that they made USD 120 million profit in the previous year. After issuing Rimbunan Hijau with a tax bill, within 24 hours the Ambassador of Malaysia came to the tax office to declare the information provided to the Malaysia stock exchange was incorrect. The tax owed was never received.