Liberian loggers’ secret tax break wipes US$13 million off country’s finances

The Liberian government has secretly given the country’s loggers a US$13 million tax break, subsidising companies at the expense of the country and forest communities. International NGOs Global Witness and Tropenbos International say the move has undone 15 years of reform.

Signed by Liberia’s President – and lauded economist – Ellen Johnson Sirleaf, 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.

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. (1)

It effectively writes off US$13 million of Bid Premium (2) payments, funds owed by Liberia’s logging companies to the state and accrued over the past ten years. (3) 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, (4) it is hard to see how this could possibly be in the interests of the Liberian people.

Young said: “There is no logical explanation for why Liberia should be subsidising 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 (5) – 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 do 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.(6)

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.”