Palaso clarifies KPHL tax to govt

Business

Reporting for Extractive Industries Transparency Initiative (Eiti) is done on a cash basis while company financial statements are reported using accrual basis of accounting, the Internal Revenue Commission (IRC) says.
Commissioner-General Betty Palaso said this yesterday when responding statements issued in recent weeks claiming underpayment of company taxes by Kumul Petroleum Holdings Ltd (KPHL) to the Government.
The commission also clarified that it only reports to Eiti on taxes paid from companies participating directly in resource projects.
This would not include the entire consolidated group holdings.
It said some entities structure themselves in such a way that their other subsidiaries or affiliates do not participate in the resource projects.
Palaso said in a statement: “This claim was made as a result of a difference observed in the annual financial statements of KPHL for 2014 and 2015 and the data released by IRC to the Eiti on the tax liability of KPHL.
“The difference observed in the reports is a result of difference in the statutory accounting disclosures standards used by companies to report their annual financial statements, in comparison to the Eiti report.
“Furthermore, the Eiti report only refers to tax data from the specific KPHL interests in resource projects, and does not take into account Kphl’s entire consolidated holdings.
“Reporting for Eiti is done on cash basis while company financial statements are reported using accrual basis of accounting.
“Thus, IRC’s report to Eiti declaring payments by KPHL for K38.5 million in 2014 and K73.8 million in 2015 captures actual cash collections of taxes from the resource projects, but are not the true reflection of the group’s company tax liability due for those periods.
“Another basis of difference is the number of KPHL subsidiaries that are accounted for in KPHL’s consolidated financial statement as opposed to the Eiti report.
“As per records maintained by the IRC, KPHL group currently holds nine subsidiary companies.
“The annual 2015 report of KPHL contains a consolidated statement of comprehensive income for each financial year, earned by the entire group including all its subsidiaries.
“The IRC report to Eiti, which requires declaration of taxes paid by participants of resource (extractives) projects, contains only tax paid by four of the subsidiaries, specifically the ones that are actively engaged in resource projects in PNG, according to our records.
“To that extent, the media statements referring to IRC’s declaration of KPHL’s company tax released to the Eiti are misleading and as it confuses the tax amount paid by the four subsidiaries in the resource sector and reported in Eiti report against the entire KPHL group’s taxation treatment for the financial years 2014 and 2015.
“Generally, IRC is bound by the taxation laws it administers not to disclose taxpayer information to anyone. However, in this case, the IRC is able to respond on this issue because the information is based on the tax information by participating resource projects already allowed by law ( Section 9 of the Income Tax Act) to be disclosed to the Eiti.”

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