by Patrick Paniwa Sakal & Gynnie Kero

TAX concessions for mining, oil and gas were given under the tax law, a well-placed source in Internal Revenue Commission said.

The source said the companies had been given able time to extract resources and that was what they were obliged to under the  income tax law.
He said this following a report in The National on Monday in which ADB country economist Aaron Batten said generous tax concessions given to mining, oil and gas companies were contributing to low government revenue per capita.
The source said mining companies being given time for construction was  the major reason the average effective tax on PNG’s mining, oil and gas companies was on the low side of fiscal regimes across the world,  as stated by Batten.

“The recently-opened Ramu nickel and cobalt mine has a 10-year tax holiday before it will contribute to national revenue,” Batten said.

“Many other similarly-beneficial concessions have been made to firms across the sector.”

The source said the companies also needed time to extract, produce, export and sell their products before generating a continuous income to pay tax.
The source cited the case of Exxon Mobil’s LNG project and that of other mining and petroleum companies, which he said were covered under the tax concession law until they started selling their products.
He said IRC should start taxing the LNG project in 2014 when it ships its first export.
Meantime, PNG’s economy is forecast to slow down over the next three years and the impact the tax regime may have on this slowdown is unknown at this stage, according to PricewaterhouseCoopers senior manager Paul Previtera.
He said this was more likely to come from external factors such as global economic climate. 

“There has been little change to PNG’s tax regime over the past two years,” Previtera said.
“PNG’s corporate tax rate of 30% is relatively high compared with many countries in the region.
 “It is difficult to comment on how ‘good or bad’ PNG’s tax regime is.
“Concerns are being raised regarding PNG’s competitiveness in attracting foreign capital and the rate may be reduced if this continues at some point in the future.”

He said the government’s job was to ensure there was a balance whereby it could collect as much tax as it could without discouraging business activity in PNG.
In the mid 1990s, there was a significant fall in investment in PNG because of the high tax rates being imposed. 

In the late 1990s and early 2000s, significant changes were made to the tax regime, which saw an increase in investment, particularly in resources.
Previtera said the IRC was also in the process of implementing a new computerised system which would allow it to process payments and refunds to taxpayers more quickly.