Countries generally tax the forestry sector to achieve the twin objectives of revenue maximization and sustainability of logging levels. In an ideal world of perfect markets and information, auctions would be the best instrument to determine the price of extraction rights. However, a number of factors-including a lack of information on the forest resources under consideration, uncertainties as to the stability of property rights over time, and a lack of access to credit-have limited the use of auctions so far, particularly in low-income countries. To establish transparency of the forestry sector's financial flows, this paper discusses a radical simplification of Liberia's current timber tax structure, including a proposal to reduce the sector's current tax system to two instruments, an area tax and an export tax.
information on the quantity and quality of timber at specific sites unless the governmentauctionsconcessions.
Auctioning concessions may require less information, since governments can establish a minimum price for the concessions and the burden of evaluating the full value of such a concession falls on bidding companies. Under competitive conditions, auctions can be a mechanism to extract a high proportion of the rents available. However, the auctioning process is not free from political maneuvering problems.
In addition to fees specific to the forestry sector