The logging sector has been one of the delinquent sectors insofar as tax compliant is concerned.
Not only that, they have been one of the most refunded sectors when it comes to GST refunds. This was revealed by the Commissioner General of the Internal Revenue Commission, Mr Sam Koim, in a statement released on Monday.
The IRC considers this as one of the high-risk sectors requiring attention and hence scaling up its compliance activities. The IRC revealed that around 20 logging companies are being audited. Based on the audit, several actions will be taken, including criminal prosecution.
“Over the years, logging companies have barely paid corporate income tax. The group salary and wages taxes they pay are very minuscule compared to the labour-intensive nature of their operations and the export income they derive. It is like they are telling us (tax office) that they are on a serious diet, yet they are putting on a lot of weight out there. We want to get to the bottom of this.” Mr Koim said.
The Commissioner General added that “Despite them not paying their fair share of taxes, they have been asserting their “exporter” status to claim and received a lot of GST refunds over the years.”
The export of goods or services is considered as a zero-rated supply hence those are the exporting business such as log exporters, will not pass the GST to the ultimate consumers who are based overseas. This renders them to be in a credit position most of the time for refund purposes.
“But,” he pondered., “how can one continue to be in business if they make losses every year? How can one continue to be in business if their overheads far exceed their income?”
Mr Koim stated that “Given the evasive pattern of behaviour and the risks posed by the logging sector, all claims for GST refunds will be subjected to a comprehensive audit.
We are now turning the spotlight on this sector. We are also undertaking a comprehensive audit on 20 logging companies and will be adding some more to that list.”