The Rainforests of Cameroon - PROFOR

124 The Rainforests of CameroonTable 6.1. Suggested adjustments to reform instruments to fit the new contextFindingSuggestionMitigate risks associated with a fixed area taxThe heterogeneity of forests in frequency anddistribution of species, timber quality, andunproductive areas is not always consideredin forest inventories (both sounding and largescale). An information asymmetry is alwayspresent, given limited public informationabout the condition of UFAs, and can lead tooverbidding.Given fluctuations in international timberprices, it is unlikely that firms can correctlyreveal their “willingness to pay” based onexpectations of future economic returns.Having to pay a fixed yearly area tax, when alarge part of a firm’s cash flow is determinedby international prices, exposes the firm to riskwhen prices fall.Limit the area tax to the concession’sproductive area, once the managementplan has been approved (this measurealso provides an incentive to completeplans expeditiously).After the auction, if the management planunexpectedly reduces the potential yield(by increasing the minimum diameterrequired to harvest the main species), acorresponding reduction of the area taxcan easily be calculated and enforced.The area tax could be linked to theinternational price of tropical wood byidentifying a basket of forest products(logs, sawn wood, ply and sliced veneer,and plywood) from different species,on the basis of which a wood priceindex would be calculated and regularlyupdated. aRestore the financial capacity of forest companies and encourage investmentThe 2006 audit highlights the very low levelof investment in new technologies in loggingand processing units; (between 2001 and2006) higher fixed costs (such as energy andtransportation costs) and the tax burden havegreatly eroded the financial capacity of mostcompanies. Under the guarantee system,funds deposited by industry are designed toensure financial compensation when taxesare unpaid or environmental regulations areviolated, but this guarantee is never applied.The guarantee creates an unnecessaryfinancial burden for companies and reducestheir ability to access credit and invest.Substantially reduce the bankguarantee for companies that haveproven compliance with fiscal andenvironmental commitments during thelast two years. Additionally, the FinanceAdministration should take strongmeasures to avoid delays in reimbursingthe guarantee at the end of each year.Encourage certification (see below).Promote diversification and use of secondary speciesContrary to expectations, forest tax and Significantly reduce taxes on lesscommerciale-library species. to: At the same time,management reforms did Delivered not expand by The the World BankThe World Bankrange of harvested species. IndustryIPremains: 192.86.100.34enact more stringent controls, includingfocused on a very few species. The Mon, tax 09 burden Nov 2009 at 17:06:18 the mill gate, to prevent illegal activity.seems to be one of the major constraints ondiversification.(c) The International Bank for Reconstruction and Development / The World Bank