BSP ‘has standing’ in tax case in PNG

The Papua New Guinea Supreme Court has ruled that the Bank South Pacific Financial Group Limited (BSP) has standing to pursue a case challenging the constitutionality of the “additional company tax”.

A five-man bench comprising Chief Justice Sir Gibbs Salika, Deputy Chief Justice Ambeng Kandakasi, Justice David Cannings, Justice Derek Hartshorn and Justice Ere Kariko ruled at Waigani yesterday that BSP had a great interest in the application and that the issues raised were real.

BSP filed the application under Section 18(1) of the Constitution on Aug 31, challenging certain amendments to the Income Tax Act which imposed on BSP an additional company tax of K190 million annually, starting last year, and a market concentration levy of the same amount.

BSP’s application sought declarations and other relief, questioning the interpretation and application of certain provisions of the Constitution as they relate to the Income Tax (Budget 2022) (amendment) Act 2021 and the Income Tax (amendment) Act 2022.

The interveners are the Internal Revenue Commission commissioner-general, Comrade Trustee Services Limited (CTSL), National Superannuation Fund (Nasfund), Nambawan Super Ltd, Association of Superannuation Funds of Papua New Guinea and the Attorney-General.

Representing BSP, lawyer Ian Molloy argued that the bank had an interest and that the levy and the additional company tax had direct and adverse impact on it.

“First, of course, is its liability to pay what is now the additional company tax,” he stated.

“The liability is apparent from the contents of BSP Group chief financial officer Royesh Dayal’s affidavit and the fact that BSP has already paid K190 million(US$53 million) into an escrow account in respect to the additional tax pending the determination of these proceedings.”

Also, the application raises significant constitutional issues particularly, but not limited, to the infringement of Section 37 of the Constitution, which is protection to law, and the non-compliance with Section 210 of the Constitution in relation to the pre-condition to imposition of taxation.

Molloy added that BSP was not a mere busy-body but was directly affected by the legislation.

Justice Kandakasi asked Molloy whether there were any stakeholder consultation by the Government prior to passing the law.

Molloy said it was conducted in October 2021.

He, however, could not provide further assistance to the court.

The CTSL through lawyer Jeanel Nigs, Nasfund and Nambawan Super Limited lawyer Lubia Evore agreed that BSP had standing to bring this application. Russel Uware, from the Solicitor General’s Office, said the Attorney-General had opposed the application but did not file a supporting application.