Greenpeace says it has company documents which show price-fixing between two Danzer subsidiaries - Interholco, based in Switzerland, and Siforco, based in the Democratic Republic of Congo or DRC. Greenpeace says Siforco sells its wood to Interholco at an official price below its true market value. By making unofficial payments into offshore bank accounts in Europe, the company avoids paying taxes in the DRC. Michelle Medeiros is Africa Forest Coordinator for Greenpeace International.

MEDEIROS: The issue is that a company, Danzer, is actually under-invoicing the timber that it’s getting out of the DRC and therefore underpaying and not declaring all of its profits. It is actually declaring a profit loss.

Greenpeace says the DRC and the Republic of Congo may have lost €7.8 million in tax revenue from 2002 to 2006. That’s absurd, says Olof von Gagern, who’s responsible for Danzer‘s operations in Africa

VON GAGERN: On a consolidated basis, in Africa and that includes the trading company, Interholco, based in Switzerland, we made a loss of €38 million, cumulated from 1999 to 2007. In this period and this is basically due to the war in the Democratic Republic of Congo, there was absolutely no profit which would have been available for taxation.

Danzer says that despite the losses, it’s paid about €10 million in taxes in the Congo Basin since 2004 because taxation on the forestry industry is based on the volume logged, processed and exported. In addition, it says it invests €3 million a year in social programmes. It’s not the first time that Danzer and Greenpeace have crossed swords. But behind this latest spat, there’s a wider issue. Here’s Michelle Medeiros again:

MEDEIROS: There is in the international global trade between multinationals, 60 per cent are between companies that are groups or subsidiaries and there is an estimate of over $600 billion a year that has been under-invoiced or transfer pricing within this 60 per cent of international trade.”

Transfer pricing is vital for multinational companies as they have to give a value to goods which are being transferred from country to country. Olof von Gagern explains.

GAGERN: “As we are working down in Africa, there are many services which we have to render here in Europe. So this means that obviously in the prices we are making between our two subsidiaries, we are also pricing in the cost for those services.”

But the system is open to abuse. Peter Niggli is executive director of Alliance Sud, a Swiss coalition of development organisations. He says illegitimate transfer pricing steals from poor countries and their people.

NIGGLI: “If if every company tries to avoid all the taxes, how shall the governments of these countries pay for their education, health but also all the infrastructure, building roads, whatever.”

Bruno Gurtner is chair of the Global Board of the Tax Justice Network. The Network wants all multinational companies to report their trading activities on a country by country basis.

GURTNER: “We want country by country transparency that international companies are obliged to publish far more details country by country such as investments, tax paid to governments, how many people are engaged, etc.”

Gurtner says such transparency would minimise the risk of transfer price abuse.