I’ve written much about the subject of log exports. Click here and scroll through the various articles. The quantities, loaded mostly on ships bound for Asia, tell one part of the story but there is another important trend line and it’s one that points in a different direction.
Using the Bank of Canada inflation calculator, I converted the dollars reported by BC Stats to 2013 equivalents. As a result, the second graph shows the average unit values realized over 20 years. During that period, the worth of a cubic metre of exported timber has dropped to about half the starting point. There is no single reason that explains this change but one relates to a problem that faces most modern states. Global businesses tends to arrange affairs to realize profits in jurisdictions where tax obligations are least.
Tax auditors regularly address abuses related to transfer pricing. It is a complicated matter that may see outgunned tax officials facing corporate officials backed by highly paid consultants. With respect to log exports, value is not merely a function of volume. Species, condition, end use and other factors influence value.
In the words of one accounting paper,
“Transfer pricing practices are responsive to opportunities for determining values in ways that are consequential for enhancing private gains, and thereby contributing to relative social impoverishment, by avoiding the payment of public taxes.”
In British Columbia, the 14 year long campaign to reduce “red-tape” has achieved one particular thing. Reducing the size of government has also reduced government’s capacity to ensure that organizations exploiting natural resources are paying a fair share for those public assets. The BC Liberal government has ensured that capacity is inadequate.