The PNG Extractive Industries Transparency Initiative (PNGEITI) has called on companies operating in the extractive sector to honour their commitments to 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 these companies made their commitments to the EITI reporting framework when they signed up to support the government in implementing the EITI Global Best Practice Standard in 2013.
The call by PNGEITI follows concerns raised by the Internal Revenue Commission (IRC) last month that leading mining companies are not complying with their mandatory obligation to pay Dividend Withholding Tax (DWT). The IRC emphasised that a lack of DWT payments implied that these companies were either not generating adequate profits or were simply avoiding their tax obligations, thus depriving the government of much-needed revenue. The IRC stated that the payment of these taxes not only upholds fair tax practices but also supports the national economy and the 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 have been no corresponding dividend payments to the stakeholders from these resource companies.
The President of the PNG Chamber of Resources and Energy (PNGCORE), in a media statement, explained that companies in the resources sector were reinvesting their profits back into the country. He emphasised that all existing projects have dedicated significant capital to mine expansion and development projects.
The Executive Director of the PNGEITI stated that while extractive sector resource companies may be reinvesting in expansions and capital expenditures as stated by PNGCORE, they must provide actual figures to justify this in the EITI annual reports as members of the EITI.
“Reinvesting in expansions among other capital expenditures is good for the economy, and the PNGEITI supports what they are 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. “I’m calling on resource companies to disclose to the public the actual figures expended on reinvesting in expansions and capital expenditures, as these alone will justify their stance,” he added.
The call for transparency and accountability in PNG’s extractive sector is not just about compliance but also 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 must always demonstrate that they are honouring their commitments.
The PNGEITI reports are considered reliable and comprehensible sources 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, while 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 that 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 were considered not material for reporting. This meant that government revenue 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 noted that from January 2017, a standardised 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 introduced in the 2018 and 2019 Budgets exempted PNG LNG-sourced profits from paying dividends, consistent with the PNG LNG Gas Agreement, which also contributed to low DWT revenue to the government from 2018 to 2022.
The table below provides a summary of DWT received by the government from the years 2013 to 2022 as contained in the PNGEITI reports that have been published over these years.
