16 Oct 2002

PNG government settles VAT dispute

12:12 pm on 16 October 2002

The Papua New Guinea Government has settled a dispute over Value Added tax or VAT, which threatened to drastically cut its revenue, and had plunged the tax collection system into turmoil.

The tax was declared unconstitutional last month after a provincial governor had challenged it.

Governor Luther Wenge wanted provinces to get a greater share of the revenue from VAT.

Last week the National Government won a stay on the court decision, allowing it time to negotiate with Mr Wenge.

And as our correspondent Peter Niesi reports agreement has now been reached to extend the stay until July.

"I n the meantime, the government will repeal the value added tax laws and replace them with the goods and services tax. Part of the agreement is also, that starting from January 1st 2004, the national will only be getting 20 percent while the provinces will be getting 80 percent - that's compared to the current scenario wher the provincial government gets 30 pecent and the nationals government gets 70 percent."