KPHL boss denies tax claim

Business

Kumul Petroleum Holdings Ltd (KPHL) managing-director Wapu Sonk says it is no secret tax from the multi-billion kina PNG LNG Project has been less than expected.
Sonk attributed this to the depressed oil and LNG prices in the years 2014-2016, rather than any evasion or avoidance of tax. He was responding to a statement by Opposition Leader Patrick Pruaitch who queried the tax payment.
In a statement yesterday, Sonk said: “The ‘tax expense’ figures quoted are correct and were reflected in the financial statements of the group in 2014 and 2015, which were prepared and audited in accordance with international accounting and auditing standards by Ernst & Young and certified by the Auditor-General’s Office.”
He said under the International Financial Reporting Standards (IFRS) rules and standards, all tax expenses were recognised at the time they arose, regardless of when they were due for payment.
“Due to significant timing differences, the actual tax payable can vary materially from year to year, as was the case for the years in question,” Sonk said.
“In the case of KPHL, the corporate taxes mostly relate to its interest in the PNG LNG Project, which was allowed accelerated depreciation for tax purposes under the terms negotiated between the Government and the PNG LNG Project joint venture participants in 2009; hence, the difference in what was paid to IRC (Internal Revenue Commission) and what was recorded as tax expense.
“KPHL has lodged all tax returns for all controlled entities in an accurate and timely fashion, and has remitted all taxes payable before each due date.”
Pruaitch claims that Kumul Petroleum owes IRC K451 million for corporate taxes they should have paid in 2014 and 2015.
Pruaitch, pictured, said this was the difference between the K546.4 million declared as Kumul Petroleum’s company tax expense for 2014 and 2015 and the K95.69 million received by lRC.
“It is extremely disconcerting that neither the Department of Treasury nor the IRC were aware of details in the published accounts of PNG’s most-profitable State-owned enterprise,” he said.
In its 2015 consolidated statement of comprehensive income for the year ended December 31, 2015, Kumul Petroleum recorded that its income tax expense amounted to US$92 million (K293.9 million) in 2015, following a similar tax of US$79.06 million (K252.5 million) in 2014.
However, the IRC advised the national Government’s Extractive Industries Transparency Initiative that corporate tax paid by Kumul Petroleum only amounted to K73.8 million in 2015 and K21.89 million in 2014 prior to its name change from NPCP Ltd.
Pruaitch said it was imperative that Prime Minister Peter O’Neill, to whom Kumul Petroleum reports, explains the tax shortfalls.
He said published data suggests the State missed out of tax payments amounting to almost half a billion-kina, “money which would have greatly eased the massive government borrowing in 2014 and 2015 and contributed to improved budget outcomes”.
“Vigilance over the export earnings and profits of Kumul Petroleum by the Central Bank would also have helped to ease foreign exchange shortfalls that severely impacted the overall economy and the operations of the private sector,” he said.
Kumul’s foreign exchange revenues are deposited in a Singapore bank account.
Pruaitch said Kumul’s published 2015 annual report showed it had made an after-tax profit of US$167 million (K537 million) in 2014 after the start of LNG exports in May that year.
In 2015, Kumul Petroleum’s after-tax profit profit amounted to US$113.5 million (K365million).

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