In November 1992, the Internal Revenue Commission (IRC) was
formed from the rperggr of the Papua New Guinea Taxation Of- fice (PNGTO) and the Bureau of Customs, and now has the re- sponsibility for the administration of direct and indirect taxes on
a national basis in Papua New Guinea (PNG). Since that date we
have undertaken many initiatives to make the new organisation
more efficient and responsive to clients' needs. Income Tax The mining industry is catered for, in respect of income tax, un- der a separate taxation regime within the Income Tax Act (ITA),
Division 10, as well as some general provisions within that Act
as may be applicable. Division 10 is itself broken up into subdi- visions to cover the different types of mining leases, namely Spe- cial Mining Leases (SMLs) and Mining Leases (MLs), and peri- ods of time during which those sub-divisions apply. Ring Fencing Income tax assessed on the mining industry, with the exception
of Mining Leases (these will be explained later), has a project
basis of assessment, that is, each project is assessed separately as
if the taxable income of the taxpayer from operations attributable
to the project was the only assessable income derived by that
taxpayer. This is often referred to as "ring fencing". This is an
important point to consider because losses from unsuccessful
projects cannot be set off against income from those that are suc- cessful, except in very limited specific circumstances, such as
where an unsuccessful exploration licence is cancelled or surren- dered. The project basis of assessment applies to both resident
and non-resident companies. A relaxation in the 'ring fence' provisions was applied from 1st
January 1995, where ten percent of exploration expenditure, in- curred in areas outside of Special Mining Leases and Petroleum
Development Licences in a particular year of income, can be
claimed as an outright deduction which is limited to ten percent
of the tax otherwise payable in that year. This was introduced to
encourage exploration in PNG.