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Logging firms 'avoid Congo tax'

BBC News - July 30, 2008
Congo rainforest

The Democratic Republic of Congo and the Republic of Congo are losing at least $12m annually in tax avoidance by logging companies, Greenpeace says.

The environmental group says it has evidence showing how firms like German-owned Danzer group have set up "elaborate profit-laundering schemes".

Danzer said the allegations were "totally without foundation".

A DR Congo minister told the BBC he had not read the report but if laws were infringed, sanctions would be taken.

The country is recovering from a five-year civil war which officially ended in 2003.

The fighting was fuelled by the country's vast natural wealth, including one of the world's largest rainforests, as well as minerals such as gold and diamonds, with all sides taking advantage of the anarchy to plunder natural resources.

Correspondents say these riches have been a key factor in the civil wars, instability and bad government DR Congo has known since independence.

Earlier this week, a coalition of non-governmental groups said widespread violence continues to threaten people in eastern DR Congo.

The Congo Advocacy Coalition said that more than 2,000 rape cases were recorded last month alone in the North Kivu province.

'Populist gimmick'

In its report, Conning the Congo, Greenpeace alleges the amount of tax lost each year is 50 times the DR Congo's Ministry of Environment's annual operating budget.

"I have not read the report yet so I can only answer on principle. But I can imagine that there are many possibilities of tax evasion in many sectors," Environment Minister Jose Endundo told the BBC's Focus on Africa programme.

"What I can say about forestry, is that the commission in charge of setting the minimum export prices for timber has not met since 2000. So the logging companies took advantage of the situation to export timber at a price under its real value. It means that the Congolese government has suffered losses in terms of foreign currency earnings and taxes."

Greenpeace says it has documents showing that Danzer's Swiss subsidiary company (Interholco AG) buys timber from its African sister companies (Siforco and IFO) at below the market price and then makes up the shortfall by depositing money in offshore bank accounts.

In so doing, the group evades paying big corporate tax and export duties, the report says.

But Danzer said the allegation of tax evasion was a "populist gimmick" and the group paid tax regularly.

The company, which employees 2,400 locally in the Congo Basin, said it invests about $4.7m in social programmes every year and during DR Congo's civil war continued to pay workers their wages despite the suspension of production.

"For years Greenpeace has been attempting to tarnish the reputation of Danzer Group by floating rumours, making defamatory statements and spreading half-truths. But constantly repeating false, concocted allegations does not make them true," Danzer said in a statement.

"The Swiss Attorney General's Office and the Examining Magistrate's Office of Zug, Switzerland, dropped charges against Danzer Group filed by Greenpeace in 2004 and 2006.

"Internal investigations conducted by a renowned auditing firm commissioned by Danzer Group identified no wrongdoing."

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