IRC undertakes de-grouping

The Internal Revenue commission is currently undertaking a de-grouping exercise for companies or businesses who file tax returns only from their Headquarters but have branches in different Provinces in the country.

IRC Commissioner General, Sam Koim, says the aim of the exercise is to accurately record Goods & Services Tax at the point of sale, in whichever province it may be in, and revert the GST distribution to that Province.

Under the current tax legislation, the IRC distributes 60% of GST attributed to the Point of Sale back to the province in which the transaction was made.

During the signing of the MoU for the establishment of an IRC Office in Gulf Province, IRC Commissioner General Sam Koim, said the IRC was undertaking a de-grouping exercise for GST collections.

Koim said under the exercise the IRC will identify where the businesses are operating and where the money is coming from and will beging de-grouping companies or businesses who have branches in different provinces but only file GST returns from Port Moresby. 

The task will complement the taxpayer mapping exercise announced last year.

“That covers the entire country. We have businesses that have branches all over the country as well. But when they file GST, they file ‘Out of NCD,’ or ‘Out of Lae’ for that matter. And that’s where sometimes the GST is attributed to the Headquarters instead of where it’s collected. 

“So there’s a form line that’s supposed to be complied with as well but sometimes this is not filled. Sometimes this is not attributed so we have this challenge. So what we are doing is undertaking a taxpayer mapping exercise that will also help us in the de-grouping exercise. So we are trying to identify, which businesses operating where under what TIN number doing what business so. In that way we will be abler to help. 

“For instance Ela Motors, they have branches all over the country and if purchases are made out of Ela Motors Wewak, then the sale that is made out of Wewak will be attributed to East Sepik Provincial Government or East Sepik Province for that matter,” said Koim.

Gulf Governor, Chris Haiveta, welcomed the initiative saying for too long his Province has missed on out proper GST distribution due to the existing arrangements.

“So I welcome the announcement by the Commissioner General that de-grouping will be taking place, I welcome that as a Province who has lost a lot in terms of getting GST and other revenue in taxes that are collected here,” said Haiveta. 

Gulf Province currently, by law, receives 3 percent of the GST made in the National Capital District.

“Gulf apart from the few business activities that are there, the little GST portion of 60% we transfer to them, NCD is also obligated under the law to give a share of what they collect because most of the people in Gulf also do their business activities in Port Moresby as well,” said Koim.

Governor Haiveta said he will be asking the Commissioner General to propose amendments to the Distribution Act for the IRC to distribute the NCD GST portion to them. 

“I’ll be asking you (Koim) to assist me to make amendments to the Distribution Act, with the National Fiscal Commission and the NCD, to reflect he amendments that were made to the NCD Act, where Central Province, Motu-Koita people in NCD, the Motu-Koita Council, as well as the Gulf Province get their fair share directly from IRC rather than put through the NCD where a lot of arguments have been happening and court cases going on.

“We arms of government, need to work together and I congratulate you Commissioner General for the approach you have taken in doing de-grouping in assistance to settle se of this problems which are really administrative, but everyone get their fair share. The State, the Provincial Government and also the people of Papua New Guinea,” said Koim.

Koim said they have received similar complaints from Provincial Governments which has been taken on board with the de-grouping exercise.

Cedric Patjole