WORLD TRADE
ORGANIZATIONG/SCM/N/95/PNG/Suppl.1
G/SCM/N/99/PNG/Suppl.1G/SCM/Q2/PNG/2
G/SCM/Q3/PNG/7
27 November 2003
(03-6321)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
New and Full Notification Pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the Agreement
on Subsidies and Countervailing Measures
Extension Under SCM Article 27.4 of the Transition Period for the
Elimination of Export Subsidies Pursuant to the Procedures
in Document G/SCM/39
Supplement
Replies to Questions from the UNITED STATES1
Regarding the Notifications of PAPUA NEW GUINEA2
The following communication, dated 25 November 2003, is being circulated at the request of
the Department of Trade and Industry, Papua New Guinea.
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The United States appreciates the informatio n provided in the notification from Papua
New Guinea.  However, paragraph 1(d) of G/SCM/39 provides that the extensions granted by
the SCM Committee pursuant to its procedures shal l be subject to annual review in the form of
consultations between the Committee and Members receiving the extensions.  The annualreviews shall be conducted on the basis of updating notifications from the Members in question.
Paragraph 3(a) of G/SCM/39 provides that the updating notifications referred to in 1(d) shall
follow the agreed format for subsidy notifica tions under SCM Article 25 (found in G/SCM/6) .
(Italics added.)
It does not appear that the Committee can undertake its annual review of the extension,
pursuant to the procedures, until a properly formatted notification is received from Papua New
Guinea.  We note that the SCM Committee,  at its October 2003 meeting, approved some
modifications to the agreed format for subsidy notifications under SCM Article 25, which may
facilitate preparation of this document.
• Please provide an Article 25 notification in the appropriate format for consideration
pursuant to the procedures set out in G/SCM/39.
                                                     
1 G/SCM/Q2/PNG/1-G/SCM/Q3/PNG/6
2 G/SCM/N/95/PNG-G/SCM/N/99/PNGG/SCM/N/95/PNG/Suppl.1, G/SCM/N/99/PNG/Suppl.1,
G/SCM/Q2/PNG/2, G/SCM/Q3/PNG/7
Page 2
Reply
The legislation to which this notification refers is contained in document G/SCM/N/74/PNG.
Since Papua New Guinea's last report, there has not been any changes in the scope, coverage andintensity of the benefits to the programme since 1 September 2001 and we wish to reaffirm our
statement made in document G/SCM/N/95/PNG-G/SCM/N/99/PNG.
1. Title of the subsidy programme, if relevant, or brief description or identification of the
subsidy
Section 45B under Division 1A – Export Incentives of the Income Tax Act of Papua New
Guinea.
2. Period covered by the notification
The period covered is calendar years 2001-2002.
3. Policy objective and/or purpose
Section 45B of the Income Tax Act is an expor t incentive provided to the companies by the
Government, which aims to attract export-oriented manufacturing and foreign investment through theprovision of export incentives.  It provides for exemption from income tax, of profits resulting from
new export sales.  The amount exempted is the total net income from export sales for the first three
years after exports have started.  For another four years thereafter, increases in net export income,
measured over the rolling average of the previous three years net export income, are exempted.  Given
the company tax rate of 25 per cent, the subsidy provided is 25 per cent of net profits derived fromexport sales, for the periods and to the extent shown above.
4. Background and authority
Section 45B is under "Division 1A – Export incentives" of the Income Tax Act.  The indirect
subsidy was introduced in 1984 and is administered by the Internal Revenue Commission, the
government agency responsible for taxation and customs matters in Papua New Guinea.
Section 45B(2), part of the Income Tax Ac t and mentioned in document G/SCM/N/74/PNG,
is no longer valid.
5. Form
Income tax exemption for up to 100 per cent of net income derived from export sales of a
variety of goods (mainly mining and petroleum pr oducts) for three years.  After this period, any
export income which is in excess of the average of the prior years can be treated as exempt income,
up to and including the seventh year.
6. To whom and how the subsidy is provided (whe ther to producers, to exporters, or others;
through what mechanism;  whether a fixed or fluctuating amount per unit;  if the latter, how
determined
This subsidy, provided through the income tax system, is to promote exports of goods
manufactured in Papua New Guinea.  To date, not many companies benefited from this programme.
The programme remains the same with no changes on the coverage, amount of subsidies and the
position of the government on the duration of the subsidy.G/SCM/N/95/PNG/Suppl.1, G/SCM/N/99/PNG/Suppl.1,
G/SCM/Q2/PNG/2, G/SCM/Q3/PNG/7
Page 3
7. Amount/subsidy per unit, or in cases where this is not possible, the total amount or the annual
amount budgeted for that subsidy (indicating, if possible, the average subsidy per unit in the
previous year).  Where provision of per unit subsidy information (for the year covered by the
notification, for the previous year, or bot h) is not possible, a full explanation.
The company tax in Papua New Guinea is 25 per cent and the subsidy provided is 25 per cent
of net profits derived from export sales.  The cost of this subsidy is between US$25,000 and
US$100,000 per annum.  There are no statistics available to update the costs of this indirect subsidy to
the Government for the years 2001 and 2002.
8. Duration of the subsidy and/or any other time limits to it, including date of
inception/commencement
As stated in document G/SCM/Q3/PNG/5, Papua New Guinea does not have any plans to
either modify or eliminate the programme or even to replace it with a similar programme in the nearfuture.  PNG is expecting that this request for extension be granted for 2004 and the subsequent years
as per the requirements of the fast-track procedures.  Similarly, PNG is aware of the obligation to
eliminate the subsidy in 2009, including the fi nal two years referred to in Article 27.4.
9. Statistical data permitting an assessment of the trade effects of the subsidy.  The specific
nature and scope of such statistics is left to the judgement of the notifying Member.  To the
extent possible, relevant and/or determinable, however, it is desirable that such information
include statistics of production, consumption, imports and exports of the subsidized
product(s) or sector(s):
(a) for the three most recent years for which statistics are available;
(b) for a previous representative year, which, where possible and meaningful, should be
the latest year preceding the introduction of the subsidy or preceding the last major
change in the subsidy
The statistical data for this period is not available as most companies targeted by the
Government for this subsidy did not apply for assistance under this programme to export.  One
project, the Ramu Nickel/Cobalt, which the Government provided this incentive of indirect subsidy to
mine the resources and through this tax exemption on export income, assist/develop that region of the
country, has not gone into full production yet.  Papua New Guinea wants to reassure WTO Members
that at this stage there is no evidence of trade effects as a result of this subsidy.
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