Tax "haven" could

be tax trap

A recent suggestion that Papua New Guinea could become a “tax haven” to replace Norfolk Island is not taken seriously by PNG adminis tration officials or by Australian tax experts. According to a report, some Australian solicitors are exploring a possible loophole in the tax laws which could help companies avoid a withholding tax in some circumr stances by registering in PNG.

The official Australia attitude is that should any tax loophole show up in PNG, it will quickly be plugged by Australia because Australia’s policy is to do away with tax havens under its control.

One Sydney tax expert pointed out that in any case any company at tempting to manipulate the PNG laws to its own ends might find itself liable for unexpected PNG taxation.

There would also be the danger that New Guinea would make any protective measures retrospective, thus wiping out any advantages.

In the circumstances there would be no advantage in such a company risking capital in PNG when it could establish itself in Norfolk Island, or the New Hebrides, where taxation does not occur. In the long run, New Hebrides would be safest.