Monday, 29 November 2021 19:14

Telstra-owned Digicel may face $36m in new PNG tax Featured

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Telstra-owned Digicel may face $36m in new PNG tax Image by mohamed Hassan from Pixabay

Super taxes proposed by Papua New Guinea will hit Telstra in its role as owner of Digicel, with the telco having to pay out about $36 million if the tax comes into force.

A report in the PNG newspaper Post Courier said the proposed super taxes, revealed in leaked draft legislation, would affect the country's largest bank and telecommunications company. The tax is known as the Dominant Industry Player levy.

Telstra announced on 25 October that it had acquired Digicel's assets in the South Pacific region for US$1.6 billion, with the Federal Government contributing US$1.33 billion of this sum.

The Post Courier report said the new tax was one of the changes made to the Income Tax Act of 1959.

The additional taxes are expected to be passed on to the customers of the two organisations.

The legislation specifies a tax of 190 million kina (A$76 million) per year for major banks and 90 million kina (A$36 million) for telecommunications firms.

Any bank or telco that has more than 50.1% market share will have to pay the tax. The biggest bank in PNG is BSP, while Digicel is the biggest telco.

The report quoted BSP Group chief executive Robin Fleming as saying: "A Dominant Industry Player levy of 190 million kina will reduce the amount of dividends we pay to our shareholders by a similar amount.

“Our shareholders include KCH, MVIL, Petroleum Resources Kutubu, Credit Corporation, TISA and of course each of the super funds being Nasfund, Nambawan Super and Comrade Trustees.

“The lower dividends will over time result in a lower share price which also affects the value of shares for each shareholder.

“In combination, lower dividends and lower share prices will have an effect on crediting rates for super funds of potentially up to 3% which in turn means that every person in employment in PNG who contributes to a super fund will bear the cost of the BSP tax.”

Contacted for comment, a Telstra spokesperson responded: "We are watching developments closely in PNG and will carefully consider the proposed levy."

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Sam Varghese

Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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