Indonesia’s second largest paper company, Asia Pacific Resources International Limited (APRIL), has been pinpointed as one of the many Asian firms engaged in questionable tax practices in the Paradise Papers, the set of 13.4 million documents related to offshore investments that was leaked in early November.
The leaks have accused companies ranging from Silicon Valley technology giants Apple, Twitter, and Facebook to mining giant Glencore of using offshore companies to avoid paying taxes. High profile individuals including several Indian politicians, former Japanese Prime Minister Yukio Hatoyama, and the children of former Indonesian president Suharto have also been implicated.
In a report published on November 8, the International Consortium of Investigative Journalists (ICIJ)—an international network of reporters—outlined a series of corporate practices and contracts that APRIL could have used to avoid paying its fair share of taxes.
Much of the evidence was based on leaked documents from Bermuda-headquartered offshore legal services firm Appleby.
The report revealed that APRIL, which is based in Singapore, used the legal and administrative services of Appleby to move some of its financial dealings to tax havens.
For instance, in September 1994, APRIL set up two companies in Bermuda with the help of Appleby, and went on to list one of them—also called APRIL—on the New York Stock Exchange. It was de-listed in 2001, in the aftermath of the 1997 Asian financial crisis.
In 2013, a separate ICIJ exposé said that APRIL’s parent company Royal Golden Eagle group set up various companies in the British Virgin Islands and Cook Islands with the help of Singapore-based offshore services firm Portcullis TrustNet. One of these firms, called PEC-Tech Ltd, went on to provide engineering services to Royal Golden Eagle’s pulp and paper operations.
Appleby documents also reveal that APRIL has, or had, subsidiaries in tax havens such as Dubai or Seychelles, which are not listed on its public website.
In response to the ICIJ report, APRIL on Friday issued a lengthy statement rejecting these claims.
It said that “as a privately held company, (it) does not comment publicly on the details of its financing arrangements”. When asked to elaborate on the financial claims made by ICIJ, APRIL said they will not be making additional comments to its statement.
The statement continued: “APRIL complies with all relevant domestic and international laws and regulations in its financial dealings, as part of an overall commitment to good corporate governance and to sustainable business practices. APRIL also meets all tax obligations in the jurisdictions where it operates.”
ICIJ outlined how in a separate loan in 2011, a US$180 million loan from a group of banks was routed to APRIL via a series of companies in the Cook Islands and British Islands. According to Appleby’s documents, a lawyer for the banks said that this circuitous route is “designed to decrease the group’s overall tax burden”.
While this latter arrangement is legal and common, ICIJ said that the Appleby files show that APRIL has moved as much as US$3 billion to subsidiaries in the British Virgin Islands and other secrecy jurisdictions. Experts interviewed by ICIJ noted that the result of such practices is that countries which bear the social costs of resource extraction therefore have a smaller share of profits to tax.
Observers also noted that banks can shirk responsibility for lending directly to controversial companies by instead funding shell companies. It becomes much harder to identify responsible parties when banks lend to offshore subsidiaries and reduces the risk of them drawing criticism for the environmental damage caused by natural resource companies.
Rusmadya Maharuddin, forest campaigner, Greenpeace, said in a statement that APRIL was “depriving the Indonesian Government of tax revenue by siphoning funds offshore”.
“Every dollar locked up in a tax loophole is people’s money stolen from protecting Indonesia’s rainforests and peatlands,” he said.
Every dollar locked up in a tax loophole is people’s money stolen from protecting Indonesia’s rainforests and peatlands.
Rusmadya Maharuddin, forest campaigner, Greenpeace
APRIL’s sustainability efforts
The Paradise Papers also cited contracts in which APRIL successfully had an environmental clause removed from a US$600 million loan from a group of banks including ABN Amro and Spanish bank Banco Santander. The company wanted the clause, which required it to “take all reasonable steps in anticipation of known or expected future changes to or obligations under Environmental Law or any Environmental Licences” because it would be “burdensome” for it to monitor and anticipate changes to laws.
The ICIJ report went on to claim that APRIL’s financial backers had helped fund widespread forest clearance and burning, and that the company was clearing forest for plantations without proper community consent on Pulau Padang, an island off the Sumatran coast. It also implied that APRIL had a major role to play in Indonesia’s 2015 haze crisis, its worst forest fire season on record.
APRIL also refuted accusations about its environmental credentials, and attempts to link it to the haze crisis. It provided screen captures from satellite monitoring tool Global Forest Watch fires to show that there were limited or no fires on its concessions in during the crisis. Indeed, APRIL stayed largely under the radar during the 2015 fire season, with its competitor Asia Pulp and Paper drawing substantially more flak from authorities for the fires on its concessions.
APRIL added that thanks to its Fire Free Village Programme—an initiative where APRIL incentivises villages around its concessions to stop the practice of land burning—it reduced the occurrence of fires in areas where it operated by 90 per cent in 2015.
The company has attracted its fair share of controversy about its environmental impact in the two decades it has been around. It has been accused of widespread deforestation and forest clearance by activists ranging from Friends of the Earth to Greenpeace to the World Wide Fund for Nature (WWF), but in recent years, has stepped up its sustainability efforts significantly.
Along with its Fire Free Village Programme, it has initiated the Fire Free Alliance, and palm oil firms such as Wilmar, Sime Darby, IOI Group, Musim Mas and Asian Agri have signed up to implement similar community partnership programmes in their own concessions. This is in addition to its US$100 million commitment to peatland restoration, its Sustainable Forest Management Policy—a 2015 pledge to stop clearing forests and developing on peatlands.
APRIL has nevertheless had a few run-ins with authorities and civil society groups in recent years. In December last year, Greenpeace and WWF suspended engagement with the company due to mistrust over its operations on Pulau Padang, and more recently, Indonesia’s Environment and Forestry Ministry rejected a long-term workplan submitted by the company because it failed to meet peatland regulations. The company was given an October 30 deadline to submit a revised workplan.
In its statement, APRIL said: “APRIL remains open to constructive criticism and independent scrutiny, but is also clear and confident in the path it is on.”
The company is one of 12 Asian agribusinesses which used Appleby’s services, according to the Paradise Papers. However, the other firms have not yet been named.