Forests Sourcebook - HCV Resource Network

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Fees for services or materials provided. These charges are
common and are payments for services or materials provided
by the forestry administration. They may or may
not be voluntary, depending on whether the operator
has a choice to request the service or materials. Their
purpose should be to cover the costs of providing these
services or materials, but they are sometimes used to
collect additional revenue. They are generally administratively
efficient and have little impact on equity
(unless a significant proportion of these charges are paid
by small, low-income producers). They can be economically
efficient if they reflect the true value or cost of the
services or materials provided, which is often not the
case. They can also be used to promote other policy
objectives.
Charges on equipment or workers. Specific charges on
equipment or workers are uncommon, but a number of
countries collect charges for registration or permits to
trade in forest products or to operate processing plants.
General taxes. Companies operating in the forestry sector
are also usually required to pay the same taxes as other
industries (corporate taxes, income taxes, sales taxes,
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value-added taxes, and so forth). Their purpose is to collect
government revenue, and responsibility for such
taxes is usually outside the control of the forestry administration.
However, in some countries, tax incentives are
used to encourage certain forestry activities (afforestation,
for example).
Profit-based royalties. These types of charges (sometimes
called “resource rents”) are usually calculated as a proportion
of the profits earned by companies working in
the sector. They are common in other extractive industries
(mining, for instance) but have rarely been used in
the forestry sector.
Fines. The main purpose of fines is to deter illegal activities
in the forestry sector. Fines are usually fixed in legislation
or regulations and are usually not based on any
economic criteria, although they are sometimes based on
a multiple of the value of illegal products seized or identified
by the forest administration (called “compounding”).
The administrative and economic efficiency of
fines is generally low and could be improved in many
countries. Similarly, if law enforcement is weak, the
imposition of fines can be inequitable.
188 CHAPTER 5: IMPROVING FOREST GOVERNANCE