Toksave – PNG regulatory update: Covid-19 and state of emergency in PNG; Income Tax Act rewrite; Kumul submarine cable network and other developments

By David Hill, Sarah Kuman, Richard Kriedemann
Papua New Guinea

In brief 5 min read

First case of Covid-19 and state of emergency announced in PNG; significant proposed changes to Income Tax Act; Phase 2 of Kumul submarine cable network project initiated; and new tariffs and service standards for ports.

Covid-19 and state of emergency in PNG

State of emergency

On 20 March 2020, the Government officially announced PNG's first case of Covid-19. Following this announcement, Governor-General Sir Bob Dadae declared a state of emergency (SOE), which has seen PNG go into a mandatory 14-day lockdown, which commenced on 23 March 2020 and should end on 6 April 2020. The Governor-General also gazetted the new Emergency (General Provisions) (COVID 19) Regulation 2020, and recalled Parliament for a special sitting to be held 2 April 2020 to pass this new Bill, and other emergency regulations relating to Covid-19 in PNG during the SOE period.

As part of the SOE declaration, all international flights to PNG have been restricted, with new strict guidelines for entry, as have all domestic flights in PNG. All shipping ports in PNG have also shut down, with only ports in Motukea, Lae, Madang and Kokopo operating. The exceptions to these restrictions include transportation of approved goods and medicines; as well as movement of police, military and health officials, and other authorised persons, assisting with the country's response to the Covid 19 pandemic.

Closure of all non-essential businesses and services

All mass gatherings of more than 100 people have been banned, with closures of schools, nightclubs and public transport. Only key essential services such as banks, shopping centres, hospitals and fuel service stations have been allowed to stay open for business. All non-essential services, including private-sector businesses and government departments, have been ordered to scale down their operations and minimise the movement of their staff during the 14-day lockdown period.

Price regulation of certain goods and services

The PNG Government has also gazetted an emergency declaration for certain goods and services that will be price regulated during the SOE period. The goods and services range from general household consumable goods like rice, sugar and biscuits, to health products such as hand sanitisers, latex gloves and disposable surgical masks. Businesses that unreasonably increase or inflate the prices of these declared goods and services during the SOE period will be prosecuted by the Independent Consumer and Competition Commission.


Rewrite of the Income Tax Act 1959

On 28 February 2020, the Internal Revenue Commission (the IRC) of PNG released a consultation draft of the Income Tax Act 1959, with the aim of modernising and simplifying the legislation.

The significant amendments that are being proposed in the redraft of the Income Tax Act include new provisions relating to foreign contractors tax, treatment of depreciable assets, withholding taxes for resident and non-resident entities, and sector-specific tax arrangements.

The most notable amendment in the redraft of the Income Tax Act is the IRC's proposal for the inclusion of a capital gains tax. This would be a 15% tax on capital gains arising from the disposal of certain assets after the application of capital losses (if any).

The IRC has advised that the consultation period for the redraft of the Income Tax Act will end on 9 April 2020, with the aim of presenting this new Act in Parliament sometime in May.

Information, communication and technology

Kumul submarine cable network

Phase 2 of the Kumul submarine cable network (KSCN) project was initiated early in March, when submarine cables from Jayapura, Indonesia, were laid in Vanimo, connecting PNG to the Asian internet transmission network. Wewak in East Sepik Province and Lorengau in Manus Province have since been connected to the submarine cables, while connections for Madang in Madang Province were scheduled to be completed at the end of March.

The PNG DataCo Limited General Manager of Engineering Services, Tony Morisause, says all of PNG will be connected by fibre optics by June.

The KSCN is made up of around 5457 kilometres of internet cable that will provide the domestic internet network to link PNG's 14 provinces, with two proposed national data centres in Port Moresby and Madang. Phase 1 of the KSCN project was completed in December 2018, with a length of 1874 kilometres connecting Port Moresby, Alotau, Lae and Madang.

Ports and maritime

New tariffs and service standards for ports in PNG

On 6 March 2020, the Independent Consumer and Competition Commission released the new regulatory contract for PNG Ports Corporation Limited (PNG Ports). The regulatory contract sets out updated tariffs, and service standards, for all berth reservation services, berthing services, wharfage services and stevedoring access that are provided or administered by PNG Ports at all declared ports in PNG.

Under the new regulatory contract, 21 provisions have been included that were not captured in the previous regulatory contract, for the period 2015 to 2019. Below are some of the most notable new provisions, containing the following changes:

  • a new clause for PNG Ports to regularly report on profitability and cross subsidies;
  • current minimum service standards for all wharves amended to reflect more stringent requirements for length, draft and beam at Tier 1 ports and Tier 2 ports;
  • the application of a weighted average price cap form of price control mechanism for tariffs; and
  • maintenance of the current pricing structure but application of a price path of the Consumer Price Index plus 2.94% per annum to Tier 1 port tariffs, and the Consumer Price Index minus 8.47% per annum to Tier 2 port tariffs.

This regulatory contract will be in effect from 2020 to 2024.

News and other developments

Discussions of petroleum development licence for Pasca gas field project commence

On 6 March 2019, PNG's Petroleum Minister, Kerenga Kua, issued directives to his department to commence discussions with Twinza Oil Limited about satisfying the relevant requirements for a petroleum development licence for the Pasca condensate and gas field project.

The Pasca project is located offshore in the Gulf region and is expected to be the first offshore field to be developed in PNG.

Appointment of new Australian High Commissioner to PNG

Australia's Department of Foreign Affairs and Trade has announced the appointment of Jonathan Philp as Australia's new High Commissioner to PNG. Mr Philp replaces the outgoing High Commissioner, Bruce Davis, who had been serving in the role since 2015.

Mr Philip previously served as Australia's Ambassador to Afghanistan and Ambassador to Turkey, as well as Deputy Head of Mission for the Australian Embassy in Myanmar.