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PORT MORESBY, Papua New Guinea (August 19, 1999 – The Independent)---The PNG Trade Union Congress (PNGTUC) is calling on all ordinary citizens with small savings in commercial banks throughout the country to withdraw their savings from the banks until such time as the government alters or abolishes the 15 percent withholding tax on all accounts with the banks.

PNGTUC General Secretary John Paska expressed strong reservations against the levying of a 15 percent withholding tax on all depositors with the banks, describing it as a total rip-off that is being perpetrated on ordinary citizens by the state.

Mr. Paska issued a statement calling on all small depositors to stay away from the banks because the longer they keep their monies in the banks, the more the government will continue to pocket their hard-earned monies.

As we understand it, the 15 percent withholding tax was to have been levied only on interest earned above K 3,000. (NOTE US$ 1 = K 2.872 on August 24, 1999.) Clearly the targeted group was the rich, but now it seems there has been a blanket application of this tax on all customers, both rich and poor, he said.

Consider that most Papua New Guineans who deposit with banks have a bank balance of between K 50 to K 300 and slapping a 15 percent withholding tax on every K 100 savings takes away K15, which is a significant amount for the poor, he added.

Mr. Paska told The Independent this week that he had received complaints from people who have said that their accounts have been taxed, although their balances are less than K 10,000.

The national government imposed the 15 percent withholding tax on every account with the commercial banks beginning this year after the Parliament passed the bill last year.

It is understood that every account with a balance of K 10,000 and above will be taxed, with a general exemption for all account holders having deposits not exceeding K 10,000.

The Chairman of the Commercial Bankers Association, Noel Smith, in reply, called on the PNGTUC not to assume things, because they don't know what they are talking about.

Mr. Smith said the banks and the Internal Revenue Commission are the right people who know about this tax and they already made public statements about the bill when it was introduced early this year.

Mr. Smith strongly denied the claim by the PNGTUC that accounts with less than K 10,000 are being taxed.

Mr. Smith, who is also the Managing Director of Bank South Pacific, said earlier this year that the Internal Revenue Commission had proposed that individuals whose income is exempt from income tax, and taxpayers with total income of less than K 4,000 per annum, should not have to pay interest withholding tax or have it deducted from interest paid or credited to them.

Mr. Smith said that after the Commercial Bankers Association approached the IRC to review the matter and to vary its requirements in the public interest, the IRC reviewed its position on March 2, 1999 and issued notices to all banks that a general exemption is in effect for all account holders (other than term deposit accounts) having deposits not exceeding K 10,000.

The 15 percent withholding tax came into effect on January 1, 1999 and is currently being implemented by all commercial banks in the country.

The PNGTUC is now considering instigating a public awareness campaign aimed at informing the public about the current problem of saving their money with the banks.

They have also decided to utilize their network with the affiliates, which will be asked to discourage people from depositing or opening new accounts until such time as the government makes changes to this tax regime.

Mr. Paska said PNGTUC recognizes the value of banks. However, they cannot continue to remain silent about this rip-off from the ordinary citizens by the state.

For additional reports from The Independent, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Independent (Papua New Guinea).

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