Palt amends six project laws

The National Business

By HELEN TARAWA
PARLIAMENT yesterday passed six Papua LNG Project related amendment bills that were introduced last October.
Petroleum Minister Kerenga Kua, who introduced the bills, told Parliament that the Papua LNG project Gas agreement signed on April 19, 2019, committed the State of various fiscal and other concessions for which the laws needed to be enacted to give full effect.
Kua said Parliament had passed 10 Papua LNG related bills on Oct 16, 2019 and were certified by Speaker on Dec 23 the same year.
However, he said three of those Acts contained grammatical errors which substantially changed its meaning. They include:

  • Income Tax (Papua LNG Project) (Amendment) Bill 2020;
  • Stamp Duties (Papua LNG Project) (Amendment) Bill 2020; and,
  • Insurance (Papua LNG Project) (Amendment Bill 2020.

These are the exact legislative amendments specified in Schedule 6 of the Papua LNG Gas Agreement which were necessary to rectify the mistakes in the principal acts so there is uniformity in Papua LNG (Amendment) Acts and the Papua LNG Gas Agreement.
The Acts need to come into operation at the same time the corresponding amendment acts passed in 2019 coming into operation such that the acts with errors were immediately corrected.
Kua said the Papua Gas Agreement also provided for two per cent “production levy” which was an additional benefit apart from the traditional royalty, equity and development levy.
He said to enable this gain to be effectively implemented and its benefits realised, there needed to be necessary amendments to the Oil and Gas Act (1998) and Income Tax Act.
Kua said Parliament had to pass the following bills to give effect to the two per cent production levy provision contained in the Gas Agreement.

  • Oil and Gas (Papua LNG Project Production Levy) Amendment) Act 2020, and;
  • Income Tax (Papua LNG Project Production Levy (Amendment) Act 2020.

He said last November Parliament enacted the Income Tax 2020 Budget) (Amendment) Bill 2019 which amended Section 155H, subsection (3) (a) of the Income Tax Act 1959.
The amendment lowers the allowable deduction debt threshold for resource projects to 200 per cent from the initial 300 per cent (known as thin capitalisation ratio).
The stabilisation clause in Section 9.5 (a) of the Papua LNG Agreement requires the allowable deduction debt threshold to remain at 300 percent for the Papua LNG project.
Kua said it was therefore necessary for Parliament to enact a new law to preserve the fiscal stability guaranteed under the Papua Gas Agreement.
The bill was Income Tax (Papua LNG Project Think Capitalisation) (Amendment) Act 2020.
“We as a State agreed in commercial contract involving major project development to conduct our business in a certain way and as such we as state must honour those commitments in the agreement by giving legislative effect to it,” Kua said.