Bougainville update

Published by MAC on 2007-02-06

Bougainville update

BCL told to pay taxman

Post Courier (Papua ew Guinea)

6th February 2007

The Supreme Court has ordered that over K27 million * paid by Bougainville Copper Limited to the court trust be paid to the Chief Collector of Taxes.

A three-judge bench comprising Chief Justice Sir Mari Kapi, Justice Mark Sevua and Justice Ambeng Kandakasi, in upholding an appeal by the chief collector of taxes, restrained BCL from taking any further steps for arbitration against the state.

The court declared that the provision contained in the Mining (Bougainville Copper Agreement) Act 1974 did not permit BCL to submit for arbitration on any dispute relating to the liability of BCL to income tax or in respect of any other matter under clause 7 of the agreement.

It also declared that the purported reference for arbitration by BCL of disputes constituted contrary to clauses 7 and 23 of the agreement.

The Court also ruled that the provision were not disputes which BCL was entitled to have arbitrated.

Thefore, any attempt by BCL for an arbitration on any dispute on the issues was invalid.

The matter stems from notices of tax assessments issued by the chief collector of taxes against BCL on September 24, 2003 for the tax years of 1999, 2000, and 2001.

The total amount assessed was K28,075,581, which became payable on October 24, 2003.

BCL objected to the assessments on November 24, 2003.

On February 19, 2004 the Chief Collector of Taxes issued garnishee notices under section 272 of the Income Tax Act 1959 to compel BCL to pay up.

The matter came to the National Court with BCL seeking declarations that it was not liable to pay taxes for the years from 1990 to 2003.

It also claimed that it was entitled to call for arbitration.

The Chief Collector of Taxes on February 25, 2004 withdrew its garnishee notices and agreed not to enforce them until seven days after the determination of BCL's objections. The objection was reviewed and determined and amended notices of assessment were issued against BCL, where the sum was reduced to K27,805,115.75.

The National Court on April 28, 2005 dismissed previous orders obtained by BCL on January 6, 2005 restraining the Chief Collector of Taxes from enforcing it garnishee notices.

BCL appealed to the Supreme Court and the court on October 14, 2005 ordered that proceeds of treasury bills held by BCL, which were subject of the garnishee notices, be paid into the court until the determination of the appeal, which the court has now made a ruling.

* 3 Kina is approximately US$1