Parliament passed laws yesterday to exempt the interest withholding tax and GST from the PNG LNG project, and giving borrowing powers to Public Enterprises Minister Arthur Somare and Independent Public Business Corporation (IPBC).
Laws passed were amendments to section 37 of the IPBC Act, section 35 of the Income Tax Act, and section 19 of the Goods and Services Tax Act.
Mr Somare, who introduced the bills, said the amendments were necessary and demanded by the financiers of the LNG project before the March 9 deadline, to trigger the draw down of the loans.
The US$17 billion project is being funded by debt (about 70%), and advisers to the financiers wanted uncertainties and ambiguities that posed unacceptable risks to the project removed, Mr Somare said.
But critics, led by Opposition leader Sir Mekere Morauta, attacked the amendments, saying outsiders were taking control of decision making process.
Sir Mekere said the power to borrow given to one minister and authority was unnecessary.
“This law now will make IPBC the law unto itself.”
He said the Treasurer and Treasury had the powers to borrow and had done so for many other projects including Ok Tedi, Porgera and Lihir projects.
“What is the difference now?” Sir Mekere asked.
The Opposition leader said the Treasury Department and the minister were responsible for borrowing because it is this government agency that looks after fiscal matters.
He said the agenda had been set by someone else and “we are rushing at a furious phase”.
“Outsiders must not take control of decision making process. Why do we have to give powers to one minister and one authority and take away powers from Treasury?”
Sir Mekere said the amendments were totally unnecessary as the borrowing had already been done and it would wise for Cabinet to sit down and give retrospective approval.
“Cabinet must have the final say on advice by the Treasurer.”
On the interest withholding tax, Sir Mekere said this was a clear example of public policy being dictated to by interest groups.
“Why should we give our powers and money away to rich financiers?” Sir Mekere said.
On the GST exemptions, Sir Mekere said small people were paying GST so why not these people. “It’s immoral, irresponsible and unfair.”
But Mr Somare defended the amendments, saying they had negotiated over a two-year period to bring in this investor.
He said past governments had given similar concessions, for example, to InterOil, the developer of the second LNG project.
Mr Somare admitted many concessions had been given out but the Government was jealously guarding the 30% corporate tax, which would reap PNG a lot of benefits.