PAC Questions Ministry of Commerce on Withholding Tax and Long-Term Passport Printing Contract.
The Ministry of Commerce came under scrutiny following revelations at the Public Accounts Committee (PAC) hearing last week regarding a 20 year contract with a Malaysian Printing Company. Permanent Secretary for Commerce, Riley Mesepitu, briefed the committee on the complexities surrounding the 20-year contract with the company.
The contract, which dates back to 2015, involves the printing of 10,000 passports annually, with the firm receiving a fixed payment of USD 110 per passport. The agreement, described as a Built-Operate-Transfer (BOT) model, requires the Ministry to pay the Malaysian company a set amount each year, with no additional fees included.
However, concerns were raised by PAC members regarding the withholding tax implications of the contract. PAC Chairman Gordon Darcy Lilo questioned the treatment of withholding tax, noting that it had not been addressed in the agreement. He emphasized that, as the company is a service provider, withholding tax should apply. Lilo also raised concerns about the duration of the contract. The Permanent Secretary acknowledged that the withholding tax is a “grey area” in the contract, which may need to be reviewed to ensure compliance with tax regulations.
PAC member John Dean Kuku urged the Ministry to double-check the withholding tax issue to clarify the situation. The issue has prompted a reassessment of the contract’s terms, particularly in light of delays in payments to the external supplier.
As the government plans for the 2025 fiscal year, Permanent Secretary Mesepitu explained that the Ministry will need to pay the Malaysian company for the outstanding amounts to continue passport printing services.
The Ministry’s handling of the passport printing contract remains a critical issue, with the PAC calling for a closer examination of the agreement’s terms and financial arrangements, including the withholding tax concerns that have surfaced, and urging the government to be more cautious in the future when pursuing such contracts.
