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View Full Version : DTT TAX ALERT November 2003 with Deloitte Touche Tohmatsu


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18-11-2003, 11:23 PM
This Alert has been prepared to keep you informed of legislation changes and policy updates together with other information that we hope will prove to be of assistance to you in managing your business. We welcome any input from you that would make our Alert more informative and useful to you.

BUDGET PREDICTIONS:

Goods and Services Tax Rate

In order to produce a balanced budget and meet planned increases in expenditure on infrastructure the Government will need to raise additional finance from taxation or other sources. Given that it is already committed to a high proportion of gross domestic product being allocated to servicing loan repayments the most logical choice would have been to introduce the new GST legislation on 1 January 2004 with a tax rate of 12.5% in lieu of the rate of 10% currently charged as VAT.

Politically, however, this option may be an unattractive choice with the threat of a no confidence motion looming for the Government amid concerns at how this tax measure would affect the grass roots level of the population. In this environment it is our belief that the Government may not want to raise taxes in such an obvious manner and the GST will thus be introduced on 1 January 2004 with a tax rate of 10%. This will provide a measure of comfort to the Government in its effort to maintain support within the National Parliament.

Bank Account Debits Tax

The long running saga surrounding the introduction of the bank account debits tax continues with the latest advice being that it is now scheduled to commence on 1 January 2004.

We understand that there have been no further changes to the legislation or the information on the amounts to be charged since our last Alert.

Agriculture Tax Concessions

Some of the tax breaks that may be introduced as part of the Government’s drive to kick-start the so-called “green revolution” include:

A tax deduction equal to 150% of expenditure on extension services providing research and development facilities to the agricultural sector.
A concessional tax rate of 20% for the first 10 years of operation to be imposed on the taxable income of new agricultural projects commenced prior to 31 December 2006.

Stamp Duty

Stamp duty on housing is expected to be reduced to reflect the increasing cost of purchasing a property. This action will particularly benefit new homebuyers by making the cost of housing cheaper.

Superannuation

Pensions paid to superannuants from a superannuation fund are expected to be exempted from income tax

The current method of assessing tax payable on lump sum payments received from a superannuation fund on termination of employment is expected to be replaced by a rate based on a sliding scale that will be determined by the number of years the employee has been a member.

Head Tax

An enabling act is expected to be introduced to allow local level governments to impose a head tax on residents if they so desire.

Customs Act

Changes are expected to be made to the Customs Act to allow the Commissioner to impose penalties for breaches of the Act as part of his duties in administering the Act. Currently all penalties are imposed by a Court and this measure should make the Act easier to enforce.

Mining and Forestry

The mining levy reduction that began in 2002 before being halted in 2003 is expected to recommence in 2004. In spite of pressure from the forestry industry, the logging tax is not expected to be reduced.

LODGEMENT OF INCOME TAX RETURNS

The final date for lodgement of income tax returns was 31 October 2003 and all returns lodged after this date will be subject to late lodgement penalty unless special arrangements have been made with IRC.

BUDGET BREAKFAST

At this stage the Government plans to deliver the budget on 25 November and we, in conjunction with the POM Chamber of Commerce and Industry, will be holding our annual budget breakfast on 28 November at the Holiday Inn. Invitations are expected to be sent out in the near future, otherwise please contact POM CCI on 321 3077 for further details.
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If you would like to discuss any aspect of this alert please contact any of the following by email:

Paul Barber - pabarber@deloitte.com.pg
Larissa Hines - lhines@deloitte.com.pg
Arun Basu - abasu@deloitte.com.pg
Brydon Davidson - brydavidson@deloitte.com.pg
Alan Crossman - acrossman@deloitte.com.pg

Alternately, they can be telephoned on + 675 308 7000