The PNG Extractive Industries Transparency Initiative (PNGEITI) has called on companies operating in the extractive sector to honor their commitments in the EITI process by being transparent in all areas of their operations including their obligation to pay taxes to the government.
The Executive Director of the PNGEITI National Secretariat, Lucas Alkan said in a statement that these companies made their commitments to the EITI reporting framework when they signed up to supporting the Government to implement the EITI Global Best Practice Standard in 2013.
Mr. Alkan told the media today earlier that PNGEITI follows concerns by the Internal Revenue Commission (IRC) last month that leading mining companies are not complying to mandatory obligation in paying Dividend Withholding Tax (DWT).
He added, in returning the IRC emphasized that lack of DWT payments implied that these companies were either not generating adequate profits or they were simply avoiding their tax obligation, thus depriving the government of much needed revenue. The IRC said the payment of these taxes, not only upholds fair tax practices but supports the national economy and government’s revenue.
The IRC Commissioner-General indicated that despite a significant increase from K9 billion in 2013 to K44.2 billion in 2021 as reported by the Bank of PNG in its Quarterly Economic Bulletin (QEB), there has been no corresponding dividend payments to the stakeholders from these resource companies.
The President of PNG Chamber of Resources and Energy (PNGCORE), in a media statement explained that companies in the resources sector were re-investing their profits back into the country. He emphasized that all existing projects have dedicated significant capital on mine expansion and on development projects.
The Executive Director of the PNGEITI says that the extractive sector resources companies may be re-investing in expansions and capital expenditures as stated by PNGCORE, however they must provide actual figures to justify this in the EITI annual reports as members of the EITI.
“Re-investing in expansions among other capital expenditures are good for the economy and the PNGEITI supported what they were doing, but this must be justified by providing actual data or figures on such expenditures in the EITI reports for transparency purposes,” said Mr. Alkan.
Mr. Alkan said, “I’m calling on resource companies to disclose to the public the actual figures expended on re-investing in expansions and capital expenditures as this alone will justify their stance,”
The call for transparency and accountability in PNG’s extractive sector is not just about compliance but it has broader implications for good governance, social equity and sustainable development in the country.
Mr. Alkan added that enhanced transparency can lead to better resource management, build trust among different stakeholders and contribute to long term development goals.
He said these companies signed the Multi-Stakeholder Group (MSG) Memorandum of Understanding (MoU) in 2013 to be transparent in their operations through the EITI reporting process and they must always demonstrate that they are honoring their commitments.
The PNGEITI reports are considered as reliable and comprehensible source of information aimed at increasing industry transparency and accountability. This is because the reports are prepared by independent administrators in accordance with the requirements of the EITI Standard.
The extractive sector contributes significantly to the economy, both directly and indirectly in terms of government revenues and its contribution to GDP, whilst also delivering a range of socio-economic benefits.
The revenue streams deemed material for EITI reports include those that contribute 2% or more of the total known revenue received by the government from the mining and petroleum sectors for that financial year.
Revenue streams which are not considered material for reconciliation are reported unilaterally by the receiving government entity, or in the case of social expenditures, by the companies making the payments.
According to PNGEITI Reports, the Dividend Withholding Tax payments received from 2013 to 2021 was considered not material for reporting. This meant that government revenue coming from DWT was consistently under 2% of total receipts annually. For instance, in the 2017 and 2018 PNGEITI reports, K47, 229, 739 and K387, 722 were received respectively as DWT payments.
Mr. Alkan said from January 2017, a standardized DWT rate across all sectors of 15% came into effect. Prior to this, withholding taxes had been concessional for resource taxpayers, with the DWT rate being nil for dividends paid out of gas or petroleum income and 10% for dividends paid by companies engaged in mining operations.
Taxation amendments were introduced in the 2018 and 2019 Budgets that exempted the PNG LNG sourced profits from paying dividends consistent with the PNG LNG Gas Agreement and that also contributed to low DWT revenue to the government from 2018 to 2022.