Impact of Act on profits
BSP Financial Group Ltd’s (BSP) market announcement dated December 6, 2022 highlighted the increase in company tax rate for PNG Commercial Banks licensed under the Banks and Financial Institutions Act from 30 per cent to 45 per cent.
The impact of this tax rate change on BSP’s current and future profits is stated below. Impact on 2022 results International Accounting Standards require deferred tax balances to be measured at the tax rates expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
As a result, BSP will re-measure the deferred tax balances relating to the PNG Bank and its branches at 45 per cent in the December 2022 accounts.
The impact will be recognised as a credit to the Income Tax Expense in the Statement of Comprehensive Income.
BSP’s net deferred tax asset balance per the 2021 audited financial statements is K230 million ($F145.8m), tax effected at 30 per cent.
Restating the same at 45 per cent would result in an increase in the net deferred tax asset balance by circa K115m ($F72.9m), with a corresponding credit to Income Tax Expense.
This is a one-off impact of restating the deferred tax asset balance. The final impact of restating the deferred tax asset balance on the 2022 accounts will be subject to year-end tax calculations. Impact on future profits
The PNG Government repealed the Additional Company Tax of K190m ($F120.5m), effective 1 January 2023.
Consequently, BSP will no longer be liable for this annual flat tax of K190m from 2023.
The amendment to the company tax rate from 30 per cent to 45 per cent will increase current tax liabilities with a corresponding increase in Income Tax Expense effective January 1, 2023. ■