Natural resources are very important for the economy of Central African Republic. Forestry activities are the third most important component of GDP, second in terms of exports and second in terms of government revenue collection. The forestry sector is also the major private-sector employer in the country.
Roundwood production in Central African Republic has declined in recent years and is currently around 500,000 cubic metres per year. Thirty percent of this is exported and 65 percent of exports go to Europe. Most of the roundwood that is consumed locally is used to make sawnwood. Sawnwood accounts for 80 percent of the production of processed products. Sixty percent of this is exported to Europe and neighbouring countries.
The main forest charges in Central African Republic are the surface tax, felling tax and reforestation tax. The surface tax is CFA 500 per hectare per year for the whole of a concession area and this accounts for 40 percent of all government revenue collected from the sector. In addition to paying the surface tax, concessionaires must also pay a deposit of CFA 200 per hectare against their first payment of this tax before they can start operations.
The felling tax is levied on all industrial roundwood produced. The level of this tax is calculated using a formula based on the mercurial value of roundwood (calculated as a percentage of log export prices) minus transport costs from two zones in the country. The reforestation tax is only levied on log exports and this is also based on the mercurial value. In addition to these taxes, there are some minor fees for the production of woodfuel, awarding licences and transferring licences.
Forest charges are also levied on non-wood forest products (NWFPs) and services. The main charges are charges for issuing a Certificate of Origin for NWFPs that will be exported and export charges on wild pepper and bark of the rawolfia tree. Safari and ecotourism operators also pay lease fees and area fees for areas where they operate and there are some charges to for issuing hunting licences and permits.
Most of the forest charges are shared between the central government, the forestry administration and local authorities. There are different arrangements for revenue sharing (i.e. the proportions for the three different stakeholders), depending on the type of charge.
There are no charges on the production of processed forest products, but there are export duties on exports of all forest products. Currently, export duties are levied at a rate of 10 percent of export values in the case of processed products and 20 percent in the case of logs. Export duties are the most significant source of revenue from the forestry sector, accounting for 43 percent of all export duties or 53 percent of all taxes paid by the forestry sector in 1996. In addition to export duties, there are also some general taxes on the sector, such as VAT, income and profit taxes.
Fines and penalties are another source of forest revenue for the government. For breaking the Forest Code, fines of up to CFA 1 million are imposed. For tax evasion, fines can range from CFA 5 million to CFA 10 million.
The forestry administration is part of the Ministry for Environment, Water, Forestry, Hunting and Fishing. The forestry administration has sole responsibility for collecting forest charges, while other parts of government collect the other taxes from the sector. Monitoring of production is a problem and it is suspected that there is some under-reporting of production and charge evasion. In addition, the report shows that there are some differences between the actual amounts of forest charges collected and the assessed charges, suggesting that arrears of charges may be a problem.
A comprehensive audit of tax collection was implemented in 1996. This showed that the sector contributed FCA 4.9 billion to government revenues from all taxes. In 2000, it was estimated that FCA 1.5 billion was collected from forest charges, while direct expenditure on forestry was only FCA 322 million. In addition to this, the Ministry spent FCA 445 million on training, although this was for the whole Ministry. Recent statistics on capital investment on forestry by the Ministry are not available, but this amounted to FCA 770 million in 1997.
Regarding the strengths and weaknesses of the current system, the benefits of the area tax are that it is dependable and easy to collect and it encourages complete utilisation of the forest. However, there are problems when concessionaires are allocated forests that are poorly stocked. The felling tax is fairer, but it is difficult and expensive to monitor production to ensure that the correct amounts of charges are paid. Export duties are very effective, because they are easy to collect and amount to a huge part of the total revenue collection. Overall, the system of forest charge collection is quite efficient. For example, in the 1996 audit, it was estimated that the costs of charge collection were only FCA 26 million compared to the total amount of charges collected of FCA 4.9 billion.
