WORLD TRADE  
ORGANIZATION  G/SCM/N/192/PNG 
10 August 2009 
 (09-3844) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Continuation of Extension under SCM Artic le 27.4 of the Transition Period for  
the Elimination of Export Subsidies Pursuant to the Procedures Contained  
in the General Council Decision in Document WT/L/691  
 
PAPUA NEW GUINEA 
  
 The following communication, dated 6 July 2009,  is being circulated at the request of the 
Department of Foreign Affairs and Trade in Papua New Guinea.  
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 The subsidy programme in question serves the purpose of encouraging foreign and export-
oriented investment into the manufacturing sector in Papua New Guinea.  The Government of Papua 
New Guinea considers it crucial to continue to make  this subsidy programme available to investors. 
  The Government has not changed its policy on the provision and application of this export 
subsidy, as such the information contained in the previous notification remains unchanged as 
presented in WTO document numbers G/SCM/N/128/P NG and Suppl.1, except for the changes to the 
period covered.   Attached herewith is the amended copy of  document G/SCM/N/128/PNG and Suppl.1, which 
encompasses the specific changes to the notification period. 
 
 With regard to our obligations under 1(e)  and 1(f) of the General Council Decision of 
27 July 2007, please note that consultations with the relevant ministries responsible for administering 
the subsidy programme are currently being undert aken with a view to identifying the legal and 
technical requirements needed to dismantle the s ubsidy programme by 31 December 2014.  Necessary 
steps are also being taken to ensure that the beneficiaries are informed accordingly. 
 G/SCM/N/192/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 2007-2008.    
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 three years net export, are exempted.  Given the 
company tax rate of 25 per cent, the subsidy provide d 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 xemptions 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 not ified, with no changes on the coverage, amount of 
subsidies and the position of the govern ment on the duration of the subsidy. 
  G/SCM/N/192/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 2004-2005.  
8. Duration of the subsidy and/or any ot her time limits to it, including date of 
inception/commencement  
  PNG is mindful of the requirements refe rred to in the General Council Decision of 
27 July 2007 and Article 27.4 of the SCM Agreemen t to eliminate the subsidy program in question 
by 2015, which includes the final two year phase out period.   
 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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