Today, the Commissioner General of the Internal Revenue Commission (IRC) announced the amicable settlement of a longstanding tax dispute with Digicel Group Holdings Limited (Digicel) marking a significant milestone in the resolving of complex challenges.
The genesis of the dispute traces back to the enactment of the Market Concentration Levy and Additional Company Tax by Parliament, imposing tax obligations of K350 million on Digicel (PNG) Limited and K190 million on BSP Financial Group Limited (“BSP”).
These legislative moves prompted a series of legal battles, involving multiple Supreme Court challenges from BSP, various Superfunds, Digicel, and the former Opposition Leader, Honourable Belden Namah. Additionally, Digicel initiated international arbitration proceedings at the International Centre for Settlement of Investment Disputes (“ICSID”), hosted by the World Bank.
Recognizing the need for resolution and closure, the Market Concentration Levy law was repealed in the 2022 Budget Sitting, with provisions allowing for the continuation of legal challenges until settlement or determination. After substantial expenditure of resources on protracted legal proceedings, all parties involved mutually agreed that an amicable resolution was imperative.
In a landmark development, following the successful resolution of the BSP matter, the IRC is pleased to announce that Digicel has agreed to settle on a 50/50 basis. Under this agreement, the IRC will receive half of the disputed amount, totalling K175 million. These funds are securely held in an escrow account at the Central Bank and will be distributed accordingly.
Furthermore, the amicable solution concludes all historic tax disputes related to Digicel’s period of ownership of Digicel PNG, up until July 2022, and instructions will be issued for the withdrawal of arbitration proceedings at the ICSID, signalling the conclusion of the tax dispute saga.
Mr. Sam Koim, Commissioner General of the IRC, expressed gratitude towards Prime Minister Hon. James Marape for his proactive approach in facilitating the resolution process. Mr Koim highlighted the importance of learning from past arbitration experiences, such as the Downer Construction Arbitration and the PNG SDP arbitration, which incurred significant costs and time for the State due to prolonged legal proceedings. He highlighted the prudence of reaching a mutually beneficial settlement that minimizes losses and ensures a win-win outcome for all parties involved.
The resolution of this tax dispute reflects the IRC's commitment to fostering a conducive business environment while upholding the principles of fairness and justice. It signifies a positive step towards enhancing investor confidence and promoting economic stability in Papua New Guinea.