Honduras, state forestry revenue accounted for less than 1 percent of central government revenue in 1994, but stumpage prices increased by a factor of five in two years. In Cameroon. forestrytaxes accounted for 3.5 percent of revenue in 1998-99. up from 2.5 percent three years earlier. 10 In the Philippines, total taxes on logs increased from 0.1 percent of revenue in 1989 to 0.4 percent in 1991 (World Bank, 1999b). Yet, in these and other cases, the impact on deforestation has been negligible.
More radical economic remedies were also envisaged, including outright
Countries generally tax the forestry sector to achieve the twin objectives of revenue maximization and sustainability of logging levels. In an ideal world of perfect markets and information, auctions would be the best instrument to determine the price of extraction rights. However, a number of factors-including a lack of information on the forest resources under consideration, uncertainties as to the stability of property rights over time, and a lack of access to credit-have limited the use of auctions so far, particularly in low-income countries. To establish transparency of the forestry sector's financial flows, this paper discusses a radical simplification of Liberia's current timber tax structure, including a proposal to reduce the sector's current tax system to two instruments, an area tax and an export tax.
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II. Liberia’s Timber Sector
A. Evolution of Liberia’s Timber Sector
B. Liberia’s Timber Revenue System
III. Why Are ForestryTaxes Different from other Taxes?
IV. Assessment of Fiscal Instruments Used in Forestry Sector
V. An Interim Proposal for Timber Taxation
Table 1. Advantages and Disadvantages of Forest Taxes and Fees
Figure 1. Flow of Timber Through the Forest Sector and
with respect to interest costs and commissions. Third, while significant progress has been made in centralizing revenues at the treasury, forestrytax revenues (which represent about 6 percent of non-oil revenues) have yet to be transferred to the treasury. The government plans to rapidly take corrective actions on all these measures.
3. On the basis of the broadly satisfactory implementation of the SMP through end-April, the staff initiated negotiations in May 2004 on a program that could potentially be supported by a new three-year arrangement under the Poverty
restructuring and privatization of Air Gabon and Gabon Télécom experienced significant delays. After a strong start in 2004, delays continued to plague the reforms of the forestry sector, reflected in the persistence of large forestrytax arrears and uncertainty regarding the future allocation of forestry permits. However, reforms in the natural resources sector were boosted by the publication of Gabon’s first report under the Extractive Industries Transparency Initiative in December 2005. A tender for 51 percent of Gabon Télécom was finally launched in early December with
much forestry products as Gabon, forestrytaxes in 2003 brought about CFAF 40 billion, compared to CFAF 33 billion for Gabon. Before going to other rounds of tax design, it is crucial to consolidate revenues from this reform by strengthening control mechanisms and collecting tax arrears.
It is not feasible in the short run to substitute the stumpage and area taxes for the export tax. A gradual phasing out of the export tax on logs has been recommended because the tax distorts incentives, penalizing exports in favor of domestic processing. However, the stumpage tax
subsidies on gasoline, diesel, and kerosene. In Latin America, there are several examples of the application of market-based instruments (see table). Some have been ineffective in achieving their full objectives as a result of institutional weaknesses such as under-funding, unclear jurisdiction, monitoring requirements, and legal design requirements. Nevertheless, there are some promising examples:
• Resource user charges . Brazil, Colombia, and Venezuela charge a forestrytax when tree harvesting is not compensated by equivalent reforestation. So far the taxes have