Secret tax breaks

Logging companies here are said to enjoying a secret tax break in the sum of US13 million, something environmental watchdogs consider subsidizing companies at the expense of the country and forest communities and wants foreign donors to halt funding here.

International NGO Global Witness says the move has undone 15 years of reform. But Information Minister Eugene Nagbe told this paper Tuesday that the Liberian Government says it will issue an official response to the GW reports today.

GW said the agreement which give raise to the deal was signed by President Ellen Johnson Sirleaf, and that the law has knock a massive hole through the country’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.

David Young, Campaign Leader at Global Witness said: “This is a disastrous move, which puts back efforts to halt climate change, whilst also massively short-changing the Liberian people. With such economically-irrational decisions being made on the future of Liberia’s forests, 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.”

The law, known as the Forest Industrial Development and Employment Regime Act, was passed in October but only made public last week, at the height of Liberia’s election season.

“It effectively writes off US$13 million of Bid Premium payments, funds owed by Liberia’s logging companies to the state and accrued over the past ten years. For the next three years the companies will not need to pay what they owe. And the companies will be able to claim ill-defined “investments” accrued between 2016 and 2020 against this tax bill. Given the dismal state of companies’ past “investments,” not to mention their persistently poor delivery on their obligations to forest communities, it is hard to see how this could possibly be in the interests of the Liberian people,” the GW statement released Tuesday 19 December said.

Young said: “There is no logical explanation for why Liberia should be subsidizing 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 projected budget in 2017-18 of just US$563 million– this money would have made a huge difference to the Liberian people. Given the extent of high level corruption in Liberia, the inescapable question is what is motivating the government to this?”

The law also comes as a surprise given the heavy investments made by the UK, Norway, EU, and the US in reforming the forest sector and supporting the country’s poor finances. Donors contribute heavily to improving the rule of law in the forest sector and fighting climate change, including through a US$150 million agreement between Liberia and Norway. The EU not only helps the Liberia’s Forestry Development Authority, but between 2011 and 2015 also provided nearly US$ 128 million to boost the country’s budget.

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.”