IRC eyes holding companies evading tax through transfer pricing

The Internal Revenue Commission [IRC] is suspicious that there is a lot of transfer pricing going in the extractive sector.

Commission General Sam Koim said most companies buy resources at the cheapest price compared to the real market price.

Mr Koim said while traveling on the ship they changed the price to real market prices.

He said the first exercise they trialed out was the round log exports and it was successful.

"Let’s say if the market price was $500 per cubic meter in the real market price, they pretend to sell it at $100 per cubic meter out of PNG and while it is overseas, then it's gaining another $400 per cubic meters and sell it to where ever the market is," Koim said.

"Now we are focusing into the mining sector which we believe similar activities are going on," Koim said.

Koim said these activities are more sophisticated, well planned and done intentionally.

"Our auditors sometimes cannot identify this because we lack capacity," Koim added.

To close this gap, IRC will launch a new program called Tax Inspectors Without Borders [TIWB] where various experts will work in collaboration to hold accountable those practicing illicit ways to avoid tax.

Koim explains that these experts will firstly build capacity to investigate and prosecute tax offenders and secondly, assist them with expertise to audit extractive sectors especially mining.

These experts will come from several agencies including the United Nations Development Program [UNDP], the Organization of Economic Co-operation and Development [OECD], and the Australian Tax Office [ATO].

Local agencies include the Ombudsman Commission [OC], the Independent Commission Against Corruption [ICAC] and the Royal Papua New Guinea Constabulary [RPNGC].