Minister of Agriculture Robert Persaud says that though an investigation into allegations of transfer pricing is still ongoing, there has not been any evidence to suggest that companies here are engaging in this.
Speaking to this newspaper recently, the minister said that so far the investigation has not established that the principals of the companies buying the logs in China are the same as the local exporting companies. But he said the investigation is also looking into allegations of under-invoicing.
With a view to clearing the air on the issue, Persaud explained: “Transfer pricing is defined as the price that is assumed to have been charged by one part of a company for products and services it provides to another part of the same company [or sister company], in order to calculate each division’s profit and loss separately.”
The minister said one needs to be clear that unless this relationship of ownership is clearly linked between the exporting company and the importing company, transfer pricing cannot be pronounced upon. And this is what the investigation has revealed so far – that the importing and exporting companies are unrelated. He said the issue extends across the mandate of Foreign Trade and International Trade Relations among companies and countries. He said the issue of under-invoicing would arise if the relationship of shared management of exporting company/importing company cannot be legally established and supported and there is the occurrence of a price differential between the declared export price in Guyana and the landing price in China – after computing insurance and freight costs to the Guyana declared price.
But the minister said that so far the investigations have not detected any instances of under-invoicing.
Persaud said the GFC found the export price to be in line with international tropical timber prices. According to the GFC probe, 90 per cent of prices are the same level as those overseas.
“We are looking at investigating specific prices of logs sold in China,” he said. He added that the government’s representative in China will be gathering information on the matter of prices paid for the purposes of the investigation. After this is done, an analysis will be carried out by the GFC to arrive at a landing cost.
He said a meeting has been held with the Forest Products Association (FPA) and the Guyana Manufacturing and Services Association (GMSA) with a view to forming a ministerial committee to look at developing and advising on a log exporting policy for Guyana.
This committee, when formed, will engage in national consultations.
In the wake of a slew of critical letters about the export of logs and the disproportionate returns to the country, Commissioner of Forests James Singh had said that an investigation was underway into the allegations of transfer pricing in the industry. Some weeks ago, Singh told this newspaper that he would have been making public the findings of the report. He had vowed to take action against log exporters found guilty of transfer pricing.
One letter writer quoted the actual export price declared to the GFC for purple-heart logs as US$130 per cubic metre, while the import price at Guangzhou City in China for the same logs was US$569, a large difference.
The investigation is expected to uncover if this practice indeed exists as if it does, it means that Guyana is losing millions of US dollars on levies that should be paid on these log exports.
Forest researcher Janette Bulkan spoke of transfer pricing at a lecture she held in November and called for action to be taken on the part of the government to curb this practice.
The minister is also concerned that the companies are not doing enough to add value to the industry and sought commitments from companies that they would do more in this respect.
