Tax revenue is disappearing out of Africa and into offshore bank accounts as the Congo rainforest is destroyed.
The Congo basin contains the world's second largest tropical
forest and is of incalculable importance not only in terms of
biodiversity and resources for local people but also as a giant
carbon store that is essential for climate protection. Yet over 25
percent of this precious ecosystem is controlled by the logging
industry with the majority in the Democratic Republic of Congo
(DRC) and the Republic of the Congo - two countries suffering from
In a new report "
Conning the Congo", published today, we expose how companies
like the German-Swiss Danzer group are cheating the people in this
region out of vast amounts in tax revenue every year.
How are they getting away with it?
Danzer have set up an elaborate profit laundering system whereby
their Swiss subsidiary company (Interholco AG) buys timber from its
African sister companies (Siforco and IFO) at way below the market
price and then makes up the shortfall by depositing money in
offshore bank accounts. In doing so the Danzer Group evades paying
a wad of corporate tax and export duties.
This unscrupulous behaviour appears to be indicative of the
entire logging industry operating in the area - exacerbating the
problem of illegal logging and cheating one of the poorest regions
of the world out of millions of euros each year. We have calculated
that the loss to these governments from the Danzer Group alone
could be nearly eight million Euros. This is equivalent to the cost
of vaccinating over 700,000 Congolese children under the age of
five or 50 times the DRC Ministry of Environment's annual operating
Children peer through panels of wood in the DRC.
Just one in a list of violations.
Last year we released a report "
Carving up the Congo", which uncovered the social chaos and
environmental destruction brought about by the logging sector and
exposed Danzer's involvement in illegal timber trading, bribery and
dealing with traders blacklisted by the UN Security Council for
illegal arms trafficking.
This ongoing corruption and scandalous accounting processes pose
a serious obstacle to genuine development and undermine the effort
made by the global community to alleviate poverty in the region.
Ironically, while many governments continue to pour billions into
the war-torn DRC to help it re-build, they are standing by as their
own corporations con the country out of substantial wealth while
plundering the natural resources of the region - contributing to
climate change and depriving local communities of sustainable
The World Bank is currently failing in its stated objectives of
controlling the expansion of industrial logging and improving
governance of the sector. In fact some international donors are
even considering providing financial incentives to boost the
Illegal logging is even taking place inside the Salonga
national park - the DRC's largest rainforest reserve.
The sector clearly needs tighter legislation and enforcement. In
May 2002 the DRC Government announced a moratorium on new
concessions and the extension or renewal of old ones. The
government has now committed to a legal review of the logging
industry and we are calling on them to maintain and enforce the
moratorium - withdrawing any illegal concessions. Currently the
review is characterised by secrecy and sloppiness so we're
demanding the international community and the DRC Government ensure
this review process is completely transparent, the moratorium is
maintained and enforced and that a participatory land use plan is
put in place.
International donors must not subsidise the logging industry and
scarce public funds should be used to finance measures that
effectively control logging while empowering local communities.
International aid should benefit the Congolese people rather than
the bulging bank accounts of greedy European companies.
A child from a forest dependent community in the DRC.
The value of the DRC's forests as a carbon store could be far
greater than the income generated for the country by industrial
logging. Deforestation accounts for about one fifth of global
greenhouse gas emissions and replacing industrial logging in the
DRC by an internationally-backed forest protection system would not
only be financially beneficial to the people of the DRC it would
make the country a key climate protector.
Illegal logging is destroying the world's ancient forests and accelerating climate change. Demand that the EU ban illegal timber.
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