WORLD TRADE  
ORGANIZATION  G/SCM/N/114/PNG 
14 September 2004 
 
 (04-3837) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
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  
 
Updating Notification  
 
PAPUA NEW GUINEA 
 
 The following communication, dated 13 September 2004, is being circulated at the request of the Department of Trade and In dustry in Papua New Guinea. 
 
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 Pursuant to the decision taken at the Fourth WTO Ministerial Conference in November 2001 in Doha, concerning the extension of the transition period for the elimination of certain export subsidy 
programmes provided for under Article 27.4 of the SC M Agreement and, as contained in G/SCM/39 
and paragraph 10.6 of the Decision on Implementa tion-Related Issues and Concerns, the Government 
of Papua New Guinea hereby presents its updating no tification in respect of Section 45(b) Under 
Division 1A – Export Incentives of the Income Tax Act.     The legislation to which this notification refe rs is contained in document G/SCM/N/74/PNG.  
Since Papua New Guinea's last report, there have  been no changes to the applicable subsidy 
programme in terms of the provision of any additiona l benefits or modification of the definition or 
requirements of the programme.  Thus, there have not been any changes in the scope, coverage or 
intensity of the benefits of the programme since 1 September 2001.  
  G/SCM/N/114/PNG 
Page 2  
 
 1. Title of the subsidy progra mme, if relevant, or brief descr iption or identification of the 
subsidy  
  Section 45B under Division 1A – Export Incen tives of the Income Tax Act of Papua New 
Guinea. 
 
2. Period covered by the notification
 
  The period covered is calendar year 2003.    
3. Policy objective and/or purpose
 
  Section 45B of the Income Tax Act is an e xport incentive provided to the companies by the 
Government, which aims to attract export-oriented  manufacturing and foreign investment through the 
provision 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 th ree years net export income, are exempted.  Given 
the company tax rate of 25 per cent, the subsidy pr ovided is 25 per cent of net profits derived from 
export sales, for the periods and to the extent shown above.  
4. Background and authority
 
  Section 45B is under "Division 1A – Export incen tives" of the Income Tax Act.  The indirect 
subsidy was introduced in 1984 and is administ ered 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 produc ts) 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 as previously notified
1, with no changes on the coverage, amount of 
subsidies and the position of the govern ment on the duration of the subsidy. 
 
                                                      
1 G/SCM/N/71/PNG, G/SCM/N/74/PNG & Suppl.1, G/SCM/N/99/PNG & Suppl. 1.  G/SCM/N/114/PNG 
 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 subs idy information (for the year covered by the 
notification, for the previous year, or both) is not possible, a full explanation . 
 
 The company tax in Papua New Guinea is 25 pe r cent and the subsidy provided is 25 per cent 
of net profits derived from export sales.  The co st of this subsidy is between US$25,000 and 
US$100,000 per annum.  There are no statistics availabl e to more precisely update the costs of this 
indirect subsidy to the Government for the year 2003.    
8. Duration of the subsidy and/or any ot her time limits to it, including date of 
inception/commencement  
  PNG is expecting that this request for exte nsion will be granted fo r 2005 and the subsequent 
years as per the requirements of the fast-track proce dures.  Similarly, PNG is aware of the obligation 
to eliminate the subsidy in 2009, including the final two years referred to in Article 27.4, and intends 
to undertake, at an appropriate time, a detailed study of possible options in this respect.  9. Statistical data permitting an assessment of th e trade effects of the subsidy.  The specific 
nature and scope of such statis tics 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, whic h, 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, remains under development and is not yet in full production.  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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