Digicel considering legal options after Papua New Guinea tax

Denis O’Brien

Denis O’Brien’s Digicel is considering an appeal against a “sudden, bizarre and unprecedented” new tax announced by the Papua New Guinea government.

The tax would mean a one-time charge of Kina 350m (US$99 million, on Digicel, with a further penalty of 50m kina (€13m) for non-payment.

Digicel said that it was “considering its legal options in the event that this discriminatory tax is not removed”.

Last year Digicel entered into an agreement to sell its Pacific arm to Australian telecoms giant Telstra in a deal valuing the business at up to €1.58bn (US$1.73 million).

The tax would apply whether Digicel Pacific is sold or not.

The bill will affect the timing of the announced sale to Telstra, Digicel said, as it had secured all but one of the required regulatory approvals for the sale just prior to the introduction of the tax.

Papua New Guineahas been overhauling its Income Tax Act for a number of years.

Last November it proposed a ‘dominant industry player’ levy, a fixed fee payable by taxpayers that hold a more than 40pc market share in the banking or telecommunications sectors.

The move effectively targets just two companies: Papua New Guinea’s biggest lender Bank South Pacific(BSP), and Digicel.

Last week, the parliament amended the levy, forcing telecommunications companies to pay the fee in a one-off instalment by 30 March.

In a statement, Digicel said the changes had been introduced without any consultation and were “perplexing not just for Digicel, but also for the Papua New Guinea economy”.

O’Brien said he had met with the island nation’s prime minister and two regional governors last week, who said the new tax would not proceed.

Digicel is now engaged in discussions with the Papua New Guinea government “to ensure this commitment is honoured”, the company said in a statement.

Digicel serves consumer and business customers in 32 markets in the Caribbean, Central America and Pacific.

“This matter requires urgent resolution given its implications for the sale of Digicel’s Pacific operations to Telstra but also given the knock-on consequences for all foreign direct investment exiting Papua New Guinea and the wider reputational and credit rating implications for Papua New Guinea internationally,” the company statement said.