Irish-owned, Jamaica-based telecoms group Digicel Group has said that the introduction of a new tax on the telecommunications sector in Papua New Guinea (PNG) could have implications regarding its proposed sale of Digicel Pacific to Telstra.
Late last month the Parliament of Papua New Guinea is understood to have approved an amendment to the Income Tax Act which introduced a new Additional Company Tax (‘ACT’) on the telecommunications and banking sectors. According to Digicel Group, this new levy imposes a one-off PGK350 million (USD97 million) on Digicel PNG, with a further penalty charge of PGK50 million for non-payment also payable.
In a press release issued by Digicel Group, it was claimed that at a meeting last week between the group’s owner Denis O’Brien and PNG Prime Minister James Marape, the later had assured Digicel Group that the new tax would not be introduced. Following the approval for the ACT, Digicel has said it is now engaged in discussions with the PNG government and ‘other relevant stakeholders’ to ensure this commitment is honoured.
Meanwhile, Digicel Group has said the matter requires ‘urgent resolution given its implications for the sale of Digicel’s Pacific operations to Telstra but also given the knock-on consequences for all foreign direct investment exiting Papua New Guinea and the wider reputational and credit rating implications for Papua New Guinea internationally’. In parallel with its discussions with the government, Digicel Group has confirmed that it is also considering its legal options in the event that the tax is not repealed.
Digicel Group has also suggested that the issue will affect the timing of its previously announced sale of Digicel Pacific to Telstra, noting that prior to the introduction of the ACT all but one of the required regulatory approvals to complete the transaction had been obtained. The group has said it aims to provide a further update on the matter ‘in due course’.