The face of taxation and parafiscality of the forest sector in the DRC

6.02.2020
COUNTRIES AND FORETS IN THE CONGO BASIN

Taxation, a specific principle of the legality grid in the framework of the FLEGT-VPA.

At the end of a study, funded by FAO-EU in 2012, on the establishment of a coherent, stable and transparent forest taxation system, the Federation of Timber Industrialists (FIB) had proposed a vademecum on taxation and parafiscality of the forest sector and its related activities in the DRC. This document includes an inventory of different levies (taxes, fees and royalties) on the timber sector.

This work highlighted the multiplicity of levies (several hundred), the cumbersome bureaucracies involved and the various associated hassles that weighed heavily on the profitability of companies. This context weakened the industrial logging activities of the formal sector, which was already facing a series of cost factors imposed by the environment. Decentralization was increasing harvesting, which hindered the development of the formal private forestry sector.

Despite numerous initiatives to improve the business climate, on the ground the tax burden was higher than ever. Maximizing revenue in the short term seemed to be the priority, regardless of the price to be paid in terms of deindustrialization, job losses and impact on illegal logging.

Eight (8) years later, what is the face of taxation and parafiscality? It seems opportune to make an evaluation in order to observe the gaps and predict the future of the DRC forest industry.

The constitution of a database on taxation/parafiscality with the contribution of the main ministries concerned would be desirable. To make them aware of the negative consequences of the current system, which is characterised by the multiplicity of levies, the shortcomings in the control of circuits and the resulting loss of revenue for the government. This would make it possible to reorient its policy to allow the development of businesses and better profits for the government, all with the objective of sustainable forest management. This database will also allow operators to judge their ability to hold out or invest or disinvest. As an extension of the study carried out in 2012, the FIB intends to carry out an inventory of the current state of taxation and parafiscality.  This activity will be financed through the FLEGT REDD CERTIFICATION projects in partnership with ATIBT.

The content of this document is the sole responsibility of the ATIBT and can in no way be considered as reflecting the opinion of the EU, FFEM or KFW.