Forests Sourcebook - HCV Resource Network

mental impact on the equity of the forest revenue system
and is likely to result in little public support for the forestry
administration.
Poverty alleviation considerations. Because poverty
alleviation is a major national priority in most developing
countries, forestry policy (including fiscal systems in the
forestry sector) should be designed with this in mind (see
chapter 1, Forests for Poverty Reduction, and associated
notes). Subsidies and other fiscal policies for nonforest
activities can distort the incentive structure for communitybased
forest management. Government policies regarding
revenue from taxes and fees on forest products and concessions
can also undermine indigenous communities’ interests
in and claims on forest resources.
To make fiscal systems more advantageous to poor people,
decision makers should gather and analyze information
on the impacts of various policy and management options
on the livelihoods of people living in and around the forest,
for example,
Revenue sharing. A recent trend in many countries is the
development of revenue sharing or revenue retention mechanisms,
or both. Revenue sharing occurs when part or all of
the public revenue from forest operations is shared with
individuals or local levels of government (usually in locations
where production occurs). Revenue retention occurs
where the forestry administration keeps some or all of the
revenue collected and uses it to fund their operations.
The earmarking or hypothecation of government revenue
is generally not recommended because it goes against
the principle of good public financing that public revenue
should be collected according to ability to pay and disbursed
according to need. However, revenue sharing is often proposed
as a mechanism to generate local support for forest
protection and use. Revenue sharing and revenue retention
are also suggested in situations where disbursement of public
funds is slow and unpredictable.
Although the use of revenue sharing should generally be
minimized, the above arguments may sometimes be valid. If
so, the following should be considered:
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the ways in which commercial forest harvesting affects
the availability of wildlife, nonwood forest products, and
other forest services used by local people;
the effect of protected areas or bans on hunting and collection
of nonwood forest products on local livelihoods;
the value of fuelwood and nonwood forest products lost
if a degraded forest area were to be converted to planted
forest; or
the beneficiaries of financial incentives with regard to
planted forest development.
Nonfinancial considerations: In addition to the financial
costs and benefits to forest owners and other stakeholders,
nonfinancial aspects must also be considered. Many of
these are local and can be detrimental to poor people,
including degradation of soil and water resources, loss of
access, and degradation or loss of forests that have cultural
or spiritual value.
Fiscal systems that appear to be fair to stakeholders at
the national level may have negative effects on poor communities
if those communities bear the burden of some
costs, but do not share the benefits of forest management.
Thus, fiscal systems can attempt to compensate for some of
these effects through revenue- or benefit-sharing arrangements
(see below) or can be combined with incentives to
support local participation in forest management or regulations
to minimize the negative impacts of forest management
on communities.
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Governance and administrative capability. Any decision to
automatically share revenue with lower levels of government
(or communities) should consider whether the
scheme will result in the desired effect. Lower levels of
government are likely to have less capability to manage
funds and, in particular, may be less qualified to properly
assess and collect forest charges. In addition, it should
not be automatically assumed that lower levels of government
are more responsive to local people’s needs (see
note 5.1, Decentralized Forest Management).
Property rights. In some countries, forest resources are
managed by the government on behalf of local people
(for example, where local communities own the land
under forests or own the forests entirely). In such cases,
revenue sharing is appropriate and the amount of revenue
shared with local people should be determined on
the basis of the value of their property rights.
Community forest management. In some countries, complete
(or nearly complete) control over forest management
has been delegated to local communities. In such
circumstances, the role of the forestry administration
should be as a facilitator, to ensure that best practices in
revenue collection are followed and to build capacity in
local governance and administrative capability (see note
1.2, Community-Based Forest Management).
Forest administrations as service providers. If the forestry
administration is providing a good or service, it is performing
the function of a state-owned enterprise and it
184 CHAPTER 5: IMPROVING FOREST GOVERNANCE