The Role of Tax Havens in Illegal Logging

Guest blogger Koos de Bruijn of TJN Netherlands and a member of TJN's Global Board explores the links between tax havens and illegal logging.

An interesting new episode has been added to the series by the Financieele Dagblad (Financial Daily) about the Netherlands' role as a Treaty Haven. We’ve blogged about this issue before. 

This current episode deals with the Dutch link in the illegal logging activities of Asia Pulp & Paper (APP), a leading paper producer in Indonesia. APP is the joint brand name of a number of pulp and paper companies in Indonesia and China, all belonging to the Sinar Mas Group of the Indonesian Widjaja family. The company has been accused by several organisations, including Greenpeace, of large scale illegal logging in the Indonesian rainforest. 

During the last five years APP has been expanding its activities to Europe, Northern America, Asia and Australia.The Dutch link uncovered by research institute Profundo reveals that APP  avoids taxes by using Dutch holding and financing companies. The report documents the tax dodging structure and highlights a number of irregularities, which might involve legal offences.

Based on the report Greenpeace has put pressure on ANT, the trust-office that hosts the activities for APP. According to Greenpeace the financing of APP-factories is organised through the financial holding company based in Amsterdam. Greenpeace wrote two letters to the Dutch National Bank (DNB), the supervisor of the trust-sector, in which it stated that several irregularities have been noted. Double Taxation Treaties (DTT’s) between the Netherlands and Canada, Malaysia and Indonesia might have been abused. Also the ‘friendly’ loans from the Chinese International Ningbo Bank to Paper Excellence would not be in line with the financial supervision rules in China and the Netherlands, since only an interest rate of 0.01% is being charged. 

DNB has replied that they will take account of these irregularities in their supervisory activities. Meanwhile ANT denies the acquisitions.  However, an Indonesian delegation of ANT has addressed the issue of illegal logging to the management of APP. APP announced they will cease logging trees in the rain forest.

Greenpeace is not impressed by this promise: in 2006 APP made exactly the same promise in an advert in the New York Times.

The interesting lesson of this case from a tax justice perspective is that there are potential cases everywhere. Profundo and Greenpeace have hopefully created an interesting trend.

Endnote:  The authors of the FD-serie, Siem Eikelenboom and Gaby de Groot, have been awarded the Dutch Citi Journalistic Excellence Award for their series on Tax Route the Netherlands (Belastingroute Nederland).