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close this bookAll that Glitters is not Gold - Balancing Conservation and Development in Venezuela's Frontier Forests (WRI, 1998, 60 pages)
close this folderIV. Who Benefits from Economic Activities in Forests?
View the document(introduction...)
View the document4.1 Royalties and Fees in the Forestry Sector
View the document4.2 Royalties and Fees in the Mining Sector
View the document4.3 Royalties and Fees in National Parks and Natural Monuments

4.1 Royalties and Fees in the Forestry Sector

The government collects revenue from logging through royalties and area fees. Income taxes vary according to the concessionaire's contract. During the 1970s, royalties and area fees totaled approximately US$16 per cubic meter, but as the fees were not set to change with inflation, by the early 1990s these fees had eroded to less than US$2 per cubic meter.197

In May 1994, a new fiscal law was approved by Congress, which updated the fees paid by timber concessionaires for "technical services." These services were generally defined as inspection, paperwork, evaluation, and supervision by members of the Forest Service. Technical service fees were set at $4.80 per cubic meter for the extraction of the most valuable species, and $2.70 per cubic meter for secondary species.198 With the devaluation of the bolivar, these fees are currently $1.83 per cubic meter for primary species and $1.04 per cubic meter for secondary species. Area fees remain very low at $0.02 per hectare per year for the area that will be harvested during the year. As of November 1997, timber concessionaires also pay an average of $2.34 per cubic meter as an additional extraction tax. The total of all royalties and administrative fees account for only 3 percent of the value of timber production, and this share will diminish over time as these fees lose value because of inflation.199 Compared to other tropical countries, Venezuela's logging fees are low (see Figure 9).

According to the government, royalties on the cubic meter of wood produced are calculated based on an "official" measurement of the cubic meter, which is two thirds of an actual cubic meter.200 Thus, one-third of each cubic meter is not taxed, which amounts to an average yearly subsidy of over $23,000 per concessionaire, or approximately $181,000 in the Imataca Forest Reserve alone. This subsidy is estimated to have cost the Venezuelan government approximately $75 million in the last ten years.201 Payments accrue directly to the national treasury, rather than to the Forest Service.202

According to a recent study, the amount of revenue earned from logging is so low that the Forest Service relies on the central treasury to provide enough funds to cover the costs of its operations.203

Employment by timber concessionaires can provide significant benefit for local populations. Most of the jobs, however, are seasonal and low-paying. Mining is the main base for employment in the Guayana region, and the benefits accrued locally from work in the forest sector are minimal.204 Thus, few of the communities bordering timber concessions benefit from the forest sector. The industry's failure to incorporate local communities in its operations has contributed to a lack of support for forest reserves.205