Tag Archives: tax evasion

Seems politicians are selling PNG

Concerned Taxpayer | Post Courier | 25 March 2019

Papua New Guinea is heavily reliant on revenues from the development of its abundant natural resources, which are owned by the country and its people.

Prudent management and development of the resources is the key to achieving sustained economic growth and development of this nation and its citizens. It will enable PNG to progress and achieve the status of a developed country.

Some of the obvious cases where politicians and their associates have made very poor decisions and sold the interest of this nation are in the development of mineral, petroleum, and gas resources.

The favourable and generous tax and other concessions granted to the PNG LNG Project and Ramu Nickel project, and the fast-tracking of project agreement negotiation and conclusion for some of the large gas and mining projects by way of signing of memorandum of agreements (MOUs) in recent times, is a clear demonstration that politicians are selling this nation very fast without due care.

The fast rate of growth in the nation’s debt in recent years is mainly a result of declining revenues from natural resources, and is a consequence of the poor judgment and decisions by our politicians and their associates.

This debt will consume all future revenues and the current and future generations of PNG will struggle to make ends meet.

There will come a time when PNG will deplete its natural resources and the nation will decelerate into poverty and despair, with all sort of social and economic problems, if our politicians continue to make poor judgment and decisions on economic policy and commercial interest of our country.

They key issues resulting in the on-going poor judgment and decisions are following:

– Politicians do not have the experience and technical skills for dealing with complex policy matters and commercial operations, which lends them easily susceptible to strong influence and control of interested parties and project developers;
– Government institutions lack institutional capacity and technical skills for dealing with complex policy matters and commercial operations, which lends them easily susceptible to strong influence and control of interested parties and project developers; and
– The lack of good governance resulting in the lack of transparency and accountability in dealing with complex policy matters and commercial operations. This compounds poor judgment and decisions made by Government bureaucrats and politicians.

The solution is to make the negotiation and decision making process of natural resources development in PNG become a fully transparent and accountable process. This also means that any relevant documents will become publicly available and accessible for use by the public. It will assist improve the quality of judgment and decisions made by the politicians and their associates.

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Resource nationalism risk in PNG rated as “extreme”

“government measures such as tax pressures, changing contractual terms and strict regulations can still make countries difficult to operate in”

MINING.com | 23 March 2019

According to global risk consultancy Verisk Maplecroft’s latest Resource Nationalism Index (RNI) report, a total of 30 countries have registered a significant increase in resource nationalism risk metrics over the past year, 21 of which are considered major producers of oil, gas and minerals.

The RNI is aimed to measure the risk of expropriation, the imposition of more stringent fiscal regimes, and the pressure for companies to source goods and services from local providers. Countries are also rated and ranked based on these risk metrics.

Specifically, the RNI report names Russia and the Democratic Republic of Congo (DRC) as the two notable movers on the list, with both being downgraded to ‘extreme risk’ to indicate that the risk of governments taking greater control of natural resources is the highest. In DRC’s case, the risk bump was mostly a byproduct of its new Mining Code, which allowed more government interventions and oppressive fiscal terms for existing operators. Eight countries now have the ‘extreme risk’ rating (starting from highest risk): Venezuela, DRC, Tanzania, Russia, North Korea, Zimbabwe, Swaziland and Papua New Guinea.

Government interference poses threat to operators

Although outright expropriation has become a less likely scenario than before, government measures such as tax pressures, changing contractual terms and strict regulations can still make countries difficult to operate in.

Africa has long been recognized as a high-risk jurisdiction. It has gotten worse over the past year as 10 nations experienced growth in risk factors, according the RNI report. Other countries such as Mexico, India, Malaysia, Turkey and Iraq also saw increased risks as governments took measures to erode the revenues of operators.

Improvement in Zimbabwe, Ecuador

On the upside, the RNI report shows that 24 nations have seen improvements in their index performance, including Zimbabwe (joint 5th), Vietnam (25th), Ecuador (46th) and Guinea (94th). Even though Zimbabwe is still far away from what is considered a stable mining destination, its score has improved thanks to a new government regime that has been actively encouraging foreign investment. The country boasts the world’s second largest platinum and chromium reserves, according to Verisk Maplecroft, and could attract meaningful investment from abroad and even shed its ‘extreme risk’ tag.

Ecuador has made more significant progress. Since President Lenín Moreno came to power in 2017, Ecuador has jumped from ranking 3rd and ‘extreme risk’ in the Resource Nationalism Index two years ago to 46th and ‘medium risk’ in 2019.

Read the full report here. 

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Exxon Mobil tops list of Australia’s top 10 tax dodgers

Exxon Mobil have topped the list of Australia’s biggest tax dodgers and has ‘dudded the poor people of Papua New Guinea’

Michael West | The New Daily | March 20, 2019

Whether it is misleading the Parliament of Australia, cutting its workers’ wages, paying zero tax while racking up $33 billion in income, sending gas prices into the stratosphere or dudding the poor people of Papua New Guinea, Exxon has flair.

It is also a master of intrigue. You won’t find the financial reports for ExxonMobil Australia on its website, you won’t even find the name of its directors, despite the size of this operation. You certainly won’t find their photographs without Googling madly and paying for company searches.

You absolutely won’t find mention of 585 entities Exxon has in the Bahamas, or for that matter, any breakdown of related tax-haven associations.

How is it that this, the biggest of the US oil majors, a corporation that has been making fabulous profits in Australia for 50 years, can pay zero income tax? How does it skin its taxable income in this country back to zero?

In fact, ExxonMobil (under the trading name ‘Esso’) drilled Australia’s first offshore well through a joint venture with BHP Billiton, when it discovered the Barracouta gas field in the Bass Strait in 1965.

Two years later Kingfish was found, the first offshore oil field, which to this day remains the largest oil field discovered in Australia.

How is it that with record, eye-watering gas prices, Exxon pays no income tax?

Its financial statements provide a few clues: Massive “debt-loading” – its Australian companies borrow billions of dollars from other Exxon companies overseas and funnel hundreds of millions of dollars out via interest payments on the loans.

And finally it has been pinged for it. Its 2018 financial report discloses the Australian Tax Office has been investigating Exxon’s related-party loans and has busted it for being slippery, issuing amended income tax assessments for 2010 and 2011.

Exxon brazenly notes it might sue the tax office, or settle, as it continues to “negotiate” over what it claims is fair pricing. These fighting words are typical of a bullying multinational oil giant.

Yet. it also notes the fight with the ATO has implications for 2012 to 2017 and Exxon is acutely aware of what befell its peer, Chevron, which muscled up to the ATO and lost an historic case, for pretty much the same practice – aggressive “transfer pricing of money”.

Post the four-year ATO tax transparency figures, Exxon’s latest financial statements show more of the same – thanks to spiking gas prices, cashflow jumped from $8.2 billion to $11.3 billion. Profits were wiped out by massive related-party debt.

Tax rose from $341 million to $508 million. But guess what? Not in Australia. This tax booked in the Australian entity, although the accounts don’t specify it, and although Exxon executives refused to be interviewed about it, represents tax paid in other countries, namely Papua New Guinea and Indonesia.

Further, they have lobbed in petroleum resource rent tax (PRRT) as income tax, when it has the quality of a royalty for extracting non-renewable resources from the seabed.

And then there’s the monster debt, the monster weapon of tax avoidance: Some $1.8 billion in finance charges over the past two years on Exxon’s eye-watering debt of $17.6 billion – debt owed to itself, offshore, debt to suck the profits out of Australia along with the gas.

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EITI to tackle mining industry links to money laundering, transfer pricing, corruption and tax evasion

Mining Companies Will Have Be Transparent About Owners

EITI: “The lack of transparency in this area often creates an environment for other illegal activities such as money laundering and transfer pricing. This affects other sectors of the economy and often create a conducive environment for corruption and tax evasion” 

Post Courier | July 4, 2017

Companies directly involved in the petroleum and mining sectors will be required to disclose information regarding their beneficial owners come 2020.

Beneficial owner(s) of resource projects (mine, oil and gas companies) refers to the natural person(s) who directly or indirectly owns or controls a corporate entity/ company.

This follows after a signing of contract between PNG Extractive Industries Transparency Initiative (PNGEITI) National Secretariat and KPMG yesterday.

KPMG is the successful bidder for the implementation of the Beneficial Ownership Roadmap that spells out how Papua New Guinea can develop a matrix to report beneficial owners.

The implementation of the roadmap was effected yesterday and will be rolled out until the final quarter of 2019. During this time a platform or matrix will have been developed for reporting -through the EITI reporting process in 2020.

Head of the PNG Extractive Industry Transparency Initiative National Secretariat Mr Lucas Alkan said it was the decision of EITI international board.

It wants all EITI implementing countries, including Papua New Guinea, to ensure that corporate entities that bid for, operate or invest in extractive assets disclose the identities of their beneficial owners by January 1, 2020.

Mr Alkan said this was done to identify the real owners of the companies who had acquired rights to extract oil, gas and minerals which, in many cases were not known and often hidden behind a chain of corporate entities.

“The lack of transparency in this area often creates an environment for other illegal activities such as money laundering and transfer pricing. This affects other sectors of the economy and often create a conducive environment for corruption and tax evasion,” Mr Alkan said.

He said people living in resource-rich countries such as Papua New Guinea risked losing out as revenues generated from resources exploitation in the extractive industry were often misallocated and wasted.

“The EITI requirement will ensure that beneficial ownership information is made available through public registers such as those collected and stored at the Investment Promotion Authority through company registration process,” Mr Alkan said.

Mr Alkan expressed confidence working with KPMG to successfully implement the roadmap.

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