PORT MORESBY, Papua New Guinea (Oct. 16, 2002 - Post-Courier/PINA Nius Online)---Provinces will receive 80 percent of a new Goods and Services Tax (GST) from January 1, 2004, according to an agreement ending Papua New Guinea's Value Added Tax crisis.

The GST will replace the current Value Added Tax (VAT) which will be collected by the Government from now until July 1, 2003.

The agreement was thrashed out and signed in Port Moresby yesterday to end the two-week dilemma brought about by the Supreme Court invalidating VAT last month.

Provinces will collect 80 per cent of GST with the remaining 20 per cent going to the National Government. This reverses the current situation where the national government keeps 70 per cent of VAT collections while the provinces get 30 per cent.

The agreement was signed by Prime Minister Sir Michael Somare and Morobe Governor Luther Wenge. He was the man who went to court two years ago to claim VAT as unconstitutional and won last month.

³The understanding is that the Attorney-General and Pato Lawyers are going to go to the court this morning and seek a stay up to July 1, of next year,² Sir Michael said before the signing.

This has led to a consent order in the Supreme Court, endorsed by Chief Justice Sir Arnold Amet and Justices Gibbs Salika and Ambeng Kandakasi, to stay the invalidated VAT decision until July 1, 2003.

It ends nearly two weeks of uncertainty since VAT was outlawed. This caused concerns such as the Government faced a potential loss of K450 million in funding for the 2002 Supplementary budget as well as funding for the 2003 Budget framework.

VAT collections amount to K600 million, accounting for a major portion of budget funding.

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

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