The main forestry taxes applied in the Central African Republic are the surface area tax which constitutes 40% of forestry revenue, felling tax applied on the volume of wood felled and the reforestation tax on the volume of log for export.
The taxation system must allow the State to benefit from revenue which it has the right to expect while still leaving the different operators a normal profit margin, that is, comparable to that obtained in other economic activity. Thus, the system must endeavour to maximise State revenue through dues and amounts to pay to benefit forestry. However, the amount of dues and taxes must be in relation to the state of the market and the effective possibilities for valuing economic development.
From the point of view of forestry tax, the price or total amount of dues is in part constituted upstream from the network. This upstream taxation corresponds to the following objectives:
• Increasing the cost of access to the resource should commit the operator to limiting wood losses at all stages of harvesting and to increasing transformation efficiency so as to economise on the resource; and
• Linking the price to the area of land harvested encourages the operator to increase the amount taken on the surface area allocated. This brings about a greater range of species harvested and should lead to research in new markets.
The surface area tax which became a rent which is one of the constituents of this upstream taxation and which represents, let us recall, 40% of forestry revenue, would lead to a reduction in waste and wood losses on worksites, leading to a rationalisation in the management of felled trees without great changes to the volumes taken from forests. The disadvantage is that the dimensions and riches of permits (concessions) are not the same for all companies although they are all subject to the same rate of taxation. Due to the heterogeneousness of the tree stocking, the risks of arbitary treatment of different operators is encountered, they being obliged to pay a uniform price for species with different commercial potential. This taxation could be detrimental for sustainable management for an operator for example, who has a large transformation unit with a surface area available to him which is poorly stocked, leading him to shorten rotation time in order to maintain the flow of log coming into his factory.
Taxes on volume (felling tax and reforestation tax) have the advantage of allowing differentiated treatment of species and encouraging by means of a low tax, the promotion of harvesting of so-called secondary species. They are flexible, depending on transport costs for each cubic metre and therefore contribute to the harvesting of the most remote and faraway forests.
Taxes on the volume felled depending on the mercurial value, and thus differentiated according to the species, have the advantage of limiting the selection for harvesting only the accessible plantations, and allows for taking into account the other rare species. On the other hand, this taxation requires a monitoring of the terrain which is closely followed up by the forestry administration.
Taxes on export of which the most significant are the customs exit duties currently based on the FOT value, constitute 53% of direct taxes destined for the Public Revenue Department because these are the taxes most suitable for collection and for which, in principle, the possibilities for fraud are most reduced. It is for these reasons that it is necessary to reserve a significant share for them in the taxation system.
This taxation has become more important because log quotas for export (which are taxed at 10.5% of the FOT value in the Central African Republic) is set according to the 2001 finance law concerning local transformation. The volume of log exported is equal to the volume of sawn wood exported. To encourage companies to widen their production range per species, the export quota of so-called secondary species to be promoted is not limited for the moment.
Since the exit duties are more of the important resources for the Public Revenue Department and that their collection is efficient and does not pose great many problems with regard to fraud, it can be estimated that forestry taxation is heavy downstream and could discourage exporters. However if taxation upstream is too low, the State loses on fiscal resources. The current system sets the taxable value for each species in the form of mercurial values. The tax is applied in principle on the volume of log felled or on volume in the form of sawnwood exported for 27 species. Currently the mercurial values in relation to log are defined by taking 40% of the FOB value by LM quality. These values are estimated from sources such as the « Tropical Markets » magazine, however the system lacks a little transparency and is not only adapted to market demands and does not allow for adjustment of mercurial values according to market fluctuations.
In particular, the system takes into account neither the quality of the wood nor the necessity of carrying out reductions on volume to consider faults, changes causes by pathogens and the presence of sapwood. The system could benefit from certain procedures and the drafting of the following documents:
• A three-monthly report on tropical wood markets, including a press release for general information on economic reports and use by the forestry administration and the customs services;
• A FOB values grid on the domestic market for information from the government and the production of an economic report, for the revision of taxable values, for the checking of prices aimed at fighting against the evasion of capital and to adjust the tax benefit in cash (depending on turnover and the sales prices);
• A FOB Douala price grid to be a reference point for Central African Republic’s exports for a group of species as defined for taxable values;
• A Central African Republic’s exports » price grid adjusted at 40% of the FOB Douala prices for log; and
• A table of taxable values.
According to the audit of the forestry sector done in 1997, the cost of tax collection for the 1996 tax year was 26 million FCFA with net profits for the State of 4,870 million FCFA. Therefore, the costs of collection are sufficiently low compared to the amounts received.
The government could increase revenue that it receives from the forestry sector by first of all increasing the efficiency of its collection methods. Tax reform in the area of wood harvesting has just been passed in recent finance laws (1999, 2000 and 2001). Their effect will be awaited before any other increase in taxes. What there is room to do is to reinforce monitoring and follow up operations.
For some years now, there has been a worldwide awareness concerning the limited aspect of forestry resources, the erosion and the destruction of tropical forests. In this context, felling which has neither planning nor management involved is no longer acceptable. All use of forestry resources should rest on the principle of sustainable management. The Ministry for Forestry has the responsibility of establishing management plans and the schedule of conditions containing all the necessary elements for monitoring sub-tenders who fell, unload and transport wood in the framework of the PHD. Current legal requirements concerning forestry management operations are to be outlined in the management plans drawn up by the Ministry.
As a result, all fiscal reforms aiming to increase State revenue should, either come from the Department responsible for forestry, or beforehand have the agreement of this department because all tax systems have a bearing on the behaviour of companies and thus the long term use of forestry resources. It is noticed that putting the totality of productive forestry areas into production and an increase in wood production represent possibilities for increasing tax revenue.
The Forestry Code, which is remarkable in its clarity of vision, is based on the management of the forestry patrimony and in certain clauses, notably in reference to the illimited duration of permits. Given the recent acceleration in the sector’s development, it is necessary to examine again some legislative bases in order to promulgate new laws especially in relation to the allocation of permits, management norms to add to the PHD schedule of conditions, rights of use, the role of local populations and forestry taxation.
For social aspects, current legislation recognises the rights of use of local populations and regional forestry services issuing a public notice and ensuring that local communities in a PHD area, are correctly informed and that a procedure for collection observations and objections is foreseen. Since the recognition of PHD as forestry areas must be accepted by populations and that they make a financial profit from forestry activities, they are systematically involved in the follow up of forestry operations.
Local communities, through the intermediary of towns, receive a share of forestry taxes thus making up a separate accounting system and which is destined exclusively to meeting the needs of towns. This collection of a fraction of forestry taxes is not synonymous with setting up an automatic partnership between those willing to undertake activity, that is the operators, the administration and local populations. The partnership must still be established and practised.
The risk is that such a measure might only be understood as a « right to take » profits provided by forestry, which does not modify practices and even encourages populations to accelerate and increase harvesting to benefit from a maximum of possible revenue. It would be desirable that this partial redistribution of tax result in a negotiation process between the different parties involved aiming to establish the rights and duties of each one in the framework of participative management of PHDs. The use of revenue paid out could be decided as a group. The operators would thus commit themselves in social or development action which remains their responsibility whilst the other actions would be financed by tax revenue put at the profit of villages. This clarification of roles seems all the more desirable in that operators complain quite rightly, about certain local outbidding on social actions which are asked of them, whilst they pay new taxes which are supposed to serve to finance local development.
A taxation system which has an impact on sustainable forest management is based on upstream taxation. Now in order for this system to be efficient, there would be monitoring and follow-up of harvesting activities. It is obvious that respecting conditions imposed by the PHDs and the schedule of conditions pose a problem. The government cannot follow up industrial harvesting operations of natural resources appropriately through a lack of human and material resrouces concerning the Forestry Divisions (Regional Offices for Water and Forestry). Therefore, the following recommendations are given.
The State is responsible for the training of its managers and technical personnel so that they know and understand the new regulations concerning legislation, and the tax and management systems. It must train monitoring personnel to (amongst other factors):
• Guide the PHD managers in the drafting of management inventories (note: this activity is being undertaken thanks to the Support Project for the realisation of management plans);
• Verifying and approving documents ;
• Verifying volumes harvested and abandoned in the forestry ; and
• Monitoring and following up harvesting activities.
The state must make sure that the managers employed by the forestry companies have an adequate training and if not, provide them with some.
Clear monitoring procedures should be established in order to allow for an adapted form of follow up for sustainable forest management policy, and forestry taxation moving more or less upstream from the network.
A committee for monitoring and follow-up made up of representatives from different ministries should be put into place to check, approve different documents and monitor the different aspects of proposed reforms.
The co-presidency of this committee is preferably assured by the Ministry for Finance. The composition of this committee could be the following:
• Representatives from the Ministry for Water and Forestry;
• Representatives from the Ministry for Planning;
• Representatives from the Ministry for Finance;
• Expert forestry managers.
The function of this committee is essentially a technical one. Moreover, the committee must provide recommendations to the ministries involved in the forestry sector. The monitoring is carried out on the different documents required during the allocation of PHDs and the documents drafted by harvesters when development is taking place.
Another type of monitoring could be carried out on the ground in order to evaluate the different activities and to check adherence to the schedule of conditions:
• Development and harvesting inventories;
• Harvesting work;
• Respecting norms and harvesting guides
• Volumes harvested; and
• Management of fauna.
Fiscal measures must also be accompanied by a reinforcement of collaboration between forestry administration and customs, notably by the use of the same documents for calculating dues and exit duties.
Offences highlighted to forestry harvesters and or holders of a PHD must be resolved within a given timeframe determined by the committee for monitoring and follow-up. Following a verification of the terrain, if the offences are still evident, the committee will be able to choose a sanction proportional to the seriousness of the facts noted. These sanctions can include:
• Warnings; and
• Extra fines.
Public spending on sustainable forest management is carried out though two types of institutions, that is:
• The Fund for Forestry and Tourism Development (FFTD) which became the Special Allocation Account-Forestry and Tourism Development (SAA-FTD) for which resources come from taxes and forestry dues and others ; and
• The projects under the auspices of the Ministry responsible for the Environment and Forestry, receiving foreign financing for which the main sponsors are: the World Bank, French and German Co-operation, the European Union, the World Fund for the Environment, the International Organisation of Tropical Woods, and the African Development Bank.
Technical activities of the FFTD are essentially based on reforestation (plantations in savannah areas), the rehabilitation of eroded areas. They also support the Regional Offices for Water and Forestry and sometimes the ministry responsible for the Environment, Water and Forestry, the Ministry for Tourism, all counterparts in the projects.
Thanks to the projects, activities for the sustainable management of forests in the Central African Republic have begun. Two pilot management operations have been carried out with the SESAM Company in the Salo region and with the IFB Company in Ngotto. These pilot programmes have allowed for a definition of development techniques compatible on the one hand with possibilities of the forests, and on the other hand with the economic imperatives linked to industrial activity. These techniques have facilitated better reflection on the adequacy of harvesting and perenniality of forestry plantations. This has thus secured that all this experience that the Central African Republic’s government has set up in Berberati in the north-west of the country, since 2000, a cell for forestry management for which the aim is to carrying out for the Forestry Administration management plans for all the PHD in the different areas of forestry harvesting.
The other activities featured in the sustainable forest management carried out by the projects are the following:
• The trial plantations of fuelwood, roundwood and firewood;
• Study relative to the support, maintenance and development of the forestry industry;
• Production of a dendrology manual to obtain greater knowledge about the species in the dense humid forests;
• Taking of aerial photographs of forestry and peri-forestry areas to 1/20,000 and 1/50,000;
• Forestry inventory of the south-west area of the country;
• Biophysical management inventory for the agricultural forestry area of Bangui;
• Numerical cartography of the area under inventory on the support of the Geographic Information System;
• Conservation and rational management of the dense forest of Bangassou; and
• The participative management of natural resources around large cities such as Bangui and Bossangoa (reforestation work, plantations for enriching stocks and agricultural forestry).
Sustainable forest management requires knowledge of the forest massif with all its changing parameters (compositions, structure, growth, regeneration, enriching and shoots). For this reason, forestry research is essential for drafting a plan for sustainable forest management.
This management also requires qualified personnel for the follow-up and monitoring of activities pertaining to it. Unfortunately, these are the two areas (forestry research and personnel training) which are insufficiently financed. The improvement of the transformation system for forestry products, research into new areas for secondary species and supporting the agricultural production system with the aim of slowing the impact of itinerant agriculture around PHD areas can all also be added to this list.
The survival of the industrial sector is an ever more real worry when the added factor of searching to strike the balance between the production of wood matter and the protection of the environment is present.
In fact, itinerant agriculture, the extension of coffee plantations, mining and stocking of firewood are all activities which in general are badly controlled and which contribute to reducing the surface area of productive forests. Now the development of the forestry industry implies significant investment, which means that the specific purpose of land be clearly defined. This thus involves an injection of fiscal resources in the agriculture sector such as taxes on coffee, tobacco and palm oil production and export. This measure could be widened to include taxes from hunting and mining activities from safari companies and miners having concessions in productive forestry areas.
In the context of Mutual Obligations on Wood (MOW), STABEX forestry revenues layed down by the Lomé convention that ties together the developing countries (ACP countries) to the European Community, will have to be spent as a priority within the forestry sector.
The valuing of resources in the Central African Republic began after the Second World War. After a phase of knowledge of the resources characterised by many forestry inventories, the country’s new resources were open for harvesting at the beginning of the 1970s. So as to better integrate the forestry sector into the Central African Republic’s economy whilst still ensuring the conservation of the patrimony, the State set three main long term objectives in it’s 1986-1990 five year plan and reiterated in its declaration of sectorial policy in November 1988. It concerns:
• Preserving the natural balance in forestry and ensuring the perennial nature of forestry by the mastery of management and development;
• Ensuring the valuing of forestry land and the rational use of its resources; and
• Protecting the fauna patrimony, mainly in savannah areas, so as to preserve it for future generations.
In order to reach these objectives, the State had an institutional and legislative framework and sought the support of sponsors in order to finance the development activities quoted previously.
Investment tax in the forestry sector for the past five years has been on the increase even if staff is still lacking in this sector.
Investment in the private sector in the wood industry has also been significant these past years thanks to government policy tending to encourage investors. In 1999, nine transformation units are still effectively in service: three sawmills and a plywood factory in Lobaye (IFB and SCAD), three sawmills in the Southwest, the Sangha-Mbaeré region (SEFCA and SESAM), and two sawmills in the Mamberé-Kadei region (SEFCA and Central African THENRY). It is planned that the following be set up during 2000-2001: a sawmill in Ngotto (IFD), a sawmill and a veneer sheets unit in the Sangha-Mbaeré region (SBB), two sawmills in the Mamberé-Kadei region (Colombe Forest and SOVOKAD). There is also a mobile sawmill having a special permit for felling which exists in Lobaye. All harvesters are thus in principle also transformers of wood products, but it should be said that the industrial fabric in place does not only stop at the first level of transformation. The total capacity installed in transformation units is very little known because certain installations are obsolete so they no longer render their original output. Real production currently represents 35-40%. Harvesting methods are those which are commonly used in dense tropical forests with felling and cutting up which leave almost 40% of wood products on felling which is actually a loss of this potentially tradable wood produce of 10-15%. The government decided to write in ways and means to remedy these losses into the Plan for Agricultural Development.
The evacuation of log or transformed products was done either via the river from Oubangui-Congo to Brazzaville and then via the Congolese railway to the Pointe Noire port. Otherwise, there was the other option of the road to Belabo to Cameroon then by road or railway to the Cameroon port of Douala.
Taking into account the social problems and navigating other routes, evacuation via Cameroon is the most used route. Government support for the extension of the Salo-Nola-Berbérati-Gamboula road by the road said to be the fourth parallel has helped a great deal, and now, it is the Cameroon road which is almost always used to this very day. The government was able to find sponsors, financial support for the realisation of two important bridges to replace the ferries on the Lobaye and M’Baéré rivers from the road said to be the fourth parallel. Other important work to put government assets in the forestry sector was the tarmacking, with foreign technical and financial support, for road number one linking Bangui-Bouar-Garaboulaye.
The Central African Republic is part of several agreements, conventions and treaties on the conservation and use of natural resources. The following can be quoted:
• Convention on the international trade of wild fauna and flora species threatened with extinction (CITES);
• Convention on biological diversity;
• Convention on desertification;
• UNESCO convention on world heritage;
• United Nations convention framework on climatic changes;
• International Agreement on Tropical Woods (IATW); and
• Agreement between African countries producing and exporting wood.
The various actions and commitments are the proof that the country is trying within its means, to respond to the challenge of development whilst still conserving its natural resources.
Various actions can aid the follow-up and reprise of the sector. These could include the modernisation of forestry companies, their participation in protective action, satisfactory equipment for the operations of the forestry administration (the administration, as it was previously stated, is unable to play its role due to a lack of means and sufficient training), the carrying out of teledetection work, cartography and production of inventories, a policy for listing forests and the setting up of pilot management programmes in dense forests. They can be actively followed up and researched with the aid of potential sponsors.
Administrative measures are becoming necessary because the impact of natural formations which agriculture can have and which will be gained by demographic development means that better co-ordination on administrative and political levels will be necessary especially with regard to the occupation of ground, mainly reconstituting a listed forest area, that is protected from all agricultural occupation. The adaptation of forestry and land regulations to improve the management of wood resources is necessary. For this reason, the 1998 order relative to the organisation of territorial communities which introduced the notion of forestry heritage, notably for villages and the decentralisation policy led since 1993 are a very useful support for populations interested in collective forestry action and to give back to the rural world the responsibilities for managing their heritage which is essential for the intensification of agriculture and the planning for the use of rural space.
One of the key actions, if not the most important at the moment, is that not only of seeing the realisation of management plans through the Support Project for the Realisation of Management Plans for PHDs, but also the setting up and follow-up of these plans by all parties concerned.
