SC1601                                                        
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SC REF NO. 4 OF 2015

RESERVATION PURSUANT TO SECTION 18(2) OF THE CONSTITUTION

REFERENCE BY JUSTICE GOODWIN POOLE
PRESIDING IN THE PROCEEDINGS OS NO.  288 OF 2015

BETWEEN
PAPUA NEW GUINEA FOREST INDUSTRIES ASSOCIATION INC.
Applicant

AND:
HON. DOUGLAS TOMURIESA, MINISTER FOR FORESTS
First Respondent

AND:
PAPUA NEW GUINEA FOREST AUTHORITY
Second Respondent

AND:
DAVID DATAONA, GOODWILL AMOS, MICHAEL WAU, PETER AMATUS, JOSEPHINE GENA, ISIDORE TELI AND HAKAURA HARRY, as members of the National Forest Board
Third Respondent

AND:
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Fourth Respondent

Waigani: Injia CJ, Salika Dep.CJ, Kirriwom, Gavara-Nanu JJ
2015:  14th December
2017: 1st September

CONSTITUTIONAL LAW - Validity of s 121 (1) of the Forestry Act 1991- Whether the imposition of "levy" under s 121 (1) of the Forestry Act 1991 is "an imposition of taxation" within the meaning of s 209 of the Constitution- Whether  s 121 (1) of the Forestry Act 1991 is inconsistent with s 209 of the Constitution and therefore invalid- Constitution s 18(2) &  s 209.

Facts:
In National Court proceedings in OS No. 288 of 2015, the applicant sought declaratory orders that the imposition of certain levies under s 121 of the Forestry Act and a Ministerial determination made under that provision were unlawful. In the course of the trial, the trial judge referred Constitutional questions concerning the interpretation and application of s 121 of the Forestry Act. The question arose as to whether the imposition of the levy was "an imposition of taxation" within the meaning of that expression in s 209 of the Constitution. 
Held:
Section 121 of the Forestry Act is a statute enacted by Parliament that authorises the imposition of a levy for the purpose of the raising of finance and expenditure of the National Government to finance the National Forestry Authority, a statutory authority or instrumentality of the National Government. The provision comes within the terms of s 209(1) of the Constitution. However, the Act removes the Parliament's authority and control over the imposition of log export levy in essential areas of the imposition of levy and vests those powers in the Executive through the Minister for Forests. Some of those taxing powers are expressed in wide and ambiguous terms. Therefore, s 121 of the Forestry Act and s 233 of the Forestry Regulations are inconsistent with s209(1) of the Constitution and are declared unconstitutional and invalid. 
Cases cited in the judgment:
Papua New Guinea Cases
Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853
Collins & Leahy Limited v. Collector of Stamp Duties (2001) N2150
Hugo Berguser v Joseph Aoae [1982] PNGLR 379
IRC v Hamidian-Rad (2002) SC 692
James Saleng Mileng v Alkan Tololo [1976] PNGLR 447
Mas International v David Sode, IRC Commissioner (2008) SC 944 
Misima Mines Ltd v. The Collector of Customs (2003) N2497 
Misima Mines Ltd v. The Collector of Customs & Anor (2007) N3206
Noah Mairi v Alkan Tololo (No 2) [1976] PNGLR 125
Patterson Lowa v Wapule Akipe [1982] PNGLR 39
Re Calling of Meetings of Parliament [1999] PNGLR 285
Re Phillip Bouraga [1982] PNGLR 178   
SCR No. 1 of 1990: Reference by the Executive Council of the Enga Provincial Government [1990] PNGLR 532 

Overseas Cases

Attorney-General v Wilts United Diaries Limited (1921) 37 TLR 884
Attorney-General v The Earl Selbourne [1902] I KB 388 
Cape Brandy v Inland Revenue Commissioners [1921] I KB 64

Counsel:

P Lowing, for the Applicant
R Bradshaw, for the First and Third Respondents
No appearance for the Second and Fourth Respondents

1st September, 2017

1.	BY THE COURT:  This is a reservation (Reference) made pursuant to s18(2) of the Constitution. The trial judge (Justice Goodwin Poole) referred questions on a point of law that arose during the trial in National Court proceedings OS No. 288 of 2015. The reference concerns the interpretation and application of s 209 (1) of the Constitution to s 121 of the Forestry Act 1991 (the Act). 

The Reference

2.	The  Reference states:

“ 3. THIS reference arises from the following:   

(a)	Pursuant to Section 121 (1)(d) of the Forestry Act 1991, the Minister for Forests after consultation with the National Forest Board may by notice in the National Gazette fix levies in respect of the Papua New Guinea Forest Authority (PNGNFA).

(b)	On 12 June 2014 the National Executive Council (NEC) made a decision in its Meeting No. 04/2014 for the PNGFA to be made a self-financing agency to be financed by a specific management levy.

(c)	On 6 August 2014, the National Forest Board held a meeting and amongst other resolutions resolved to introduce and impose the PNGFA Levy being an amount of K20.00/m3 to be collected based on log harvest volume, pursuant to Section 121 (1)(d) of the Forestry Act.

(d)	The imposition of the levy came into effect in the National Gazette No. G280 dated 23 April 2015.

(e)	On 27 May 2015 the Papua New Guinea Forest Industries Association Inc., the plaintiff,  commenced proceedings OS 288 of 2015 seeking  an order to declare, inter alia, that the imposition upon or collection from the Plaintiff, or its members, or holders of timber permits, or forest clearance authorities, or timber authorities and licences and any other entity affected, the levy fixed at a rate of K20.00/m3 on all logs exported, by the Defendants, their agents or servants or any of them is void and illegal and of no effect.

“3.  THE QUESTIONS ARE;

(a)	Is the imposition of a levy under Section 121 of the Forestry Act 1991, an imposition of taxation within the meaning of Section 209 of the Constitution?

(b)	And if in the affirmative, is Section 121 of the Forestry Act 1991 inconsistent with Section 209 (1) of the Constitution of Papua New Guinea and therefore unconstitutional, void and of no effect in its entirety?

(c)	If in the affirmative, are any or all notices and actions by the Defendants, including but not limited to the Notice of Levy under Section 121 published in the National Gazette No. G280 dated 23 April 2015, at page 1 and the Ministerial Notice of Levy under Section 121 issued by the First Defendant dated 16 April 2015, inconsistent with Section 209 (1) of the Constitution of Papua New Guinea and are therefore unconstitutional, illegal, and of no effect? 

Procedural matters

3.	The factual circumstances from which the point of law arise have been determined by the trial judge and those are contained in the reference which are set out in paragraphs (a) to (e) which I have reproduced above. The facts are succinct and brief. Both parties have placed additional material and facts in affidavits that do not form part of the reference and rely on them to support their arguments. Those additional facts will have to be properly introduced and determined by this Court.  A s18 (2) Reference however does not involve determination of new facts by the appeal court. A 18 (2) Reference falls to be determined by recourse to the facts determined by the trial judge which form a part of the reference: Re Calling of Meetings of Parliament [1999] PNGLR 285, Hugo Berguser v Joseph Aoae [1982] PNGLR 379, SCR No. 1 of 1982; Re Phillip Bouraga [1982] PNGLR 178 and Patterson Lowa v Wapule Akipe [1982] PNGLR 399. Also see  O 4  r 4 of the Supreme Court Rules 2012. I would reject those additional material and facts accordingly.

4.	A question in a Constitutional reference, whether it is brought under s 19 or s 18(2) of the Constitution must conform to acceptable standard of pleadings. A question that is framed in imprecise or ambiguous terms and lacking in sufficient particularity, and in the case of a s 18(2) reference that lacks supporting facts or adequate facts and annexures of relevant material or pleadings, makes it difficult for the appeal court to answer the question and the Court may strike out or decline to answer the question.

5.	In this reference, the question posed on a point of law is ambiguous in two respects. First, it is made under "Section 121 of the Forestry Act 1991". Section 121 has two different though related parts. The first part, s 121, concerns "levy" and s 121A & AB concerns a "Log Export Development Levy", a separate and different form of levy for forest products. We discern from the facts set out in the reference that the reference is confined to s 121. We also agree that s 121A & AB is not relevant to this reference.

6.	Secondly, the reference is made for an interpretation of "Section 209"  of the Constitution. Section 209 has two Sub-sections which deal with two, separate though related, matters. Subsection (1) is later singled out in the reference question.  A provision of a Constitutional law is meant to be read as a whole. The applicant does not seem to have comprehended the relevance of Subsection (2) and made no submissions whereas the respondents made forceful submissions on it, which we deal with. 
 
Constitutional provision 
7.	Section 209 of the Constitution is in the following terms: 

209.	Parliamentary responsibility.

(1)	Notwithstanding anything in this Constitution, the raising and expenditure of finance by the National Government, including the imposition of taxation and the raising of loans, is subject to authorization and control by the Parliament, and shall be regulated by an Act of the Parliament. 

(2) For each fiscal year, there shall be a National Budget comprising-
(a) estimates of finance proposed to be raised and estimates of proposed expenditure by the National Government in respect to the fiscal year; and
(b) separate appropriations for the service of that year in respect of –
(i) the service of the Parliament; and
(ii) general public service; and
(iii) the services of the Judiciary; and
(d)	such other supplementary Budgets and appropriations as are necessary.

Statutory provisions 
8.	Section 121 of the Forestry Act 1991 is in the following terms:

121.	Levies.
(1)	The Minister, after consultation with the Board, may, by notice in the National Gazette, fix levies in respect of, but not limited to, all or any of the following:—
(a)	follow-up development;
(b)	provincial development;
(c)	forest management and development;
(d)	Papua New Guinea Forest Authority.

(2)	A levy under Subsection (1) may be imposed on all holders of timber permits and of timber authorities and of licences or on such categories of holders of timber permits and of timber authorities and of licences as are specified in the notice.
(3)	A levy under this section shall be paid and collected as prescribed.

9.	Section 223 of the Forestry Regulations 1998 is in the following terms:

223. LEVIES
(1) A levy or levies fixed under Section 121 shall be payable by the holder of a timber permit, timber authority or license (as the case may be) at the time or times as specified in and to the person specified in the notice in the National Gazette fixing the levy.
(2) The holder of a timber permit, authority or license, who fails to pay a levy fixed under Section 121 of the Act at the time and to the person specified in the notice referred to in Subsection 91) is guilty of an offence.
Penalty: A fine up to but not exceeding K500,000.00
Default penalty:  A fine not exceeding K500,000.00.
(3) The method of payment and collection of levies shall be as follows:-
(a) the Managing Director or his regional representative shall prepare and deliver a Notice of assessment of levy and forward it by post or otherwise to the holder of  a timber permit, timber authority or licence as the case may be and the holder of such timber permit, timber authority or licence must pay the amount assessed, clear of all deductions, within 14 days after the date specified in the assessment and such payment shall be by bank cheque.
Penalty: A fine not exceeding K1,000.
(b) without prejudice to any other imposition, suspension or penalty that may be made or imposed under this Regulation, any amount of levy that remains unpaid after the expiration of the period specified in  Subsection (3)(a) may be recovered by the Authority as a debt and in addition thereto the holder of a timber permit, timber authority or licence as the case may be shall not be permitted to export any forest produce while levies or any part thereof remain unpaid.
(4) A notice of a levy under Section 121 shall be in Form 222 of Schedule 1.” 

Ministerial determination under s 121 of the Forestry Act and s 233(1) of the Forestry Regulations

10.	The ministerial determination published in the National Gazette on 23 April 2015  states:
                         
Forestry Act 1991

NOTICE OF LEVY UNDER SECTION 121

I, Douglas Tomuriesa, Minister for Forest, (by) virtue of the powers conferred by Section 121 (d) of the Forestry Act 1991, and all other powers me enabling, after consultation with the National Forest Board, hereby fix a levy at the rate of K20.00 per cubic meter on all logs exported by holders of timber permits, forest clearance authorities, timber authorities and licences, with effect from the date of publication of the Notice in the National Gazette.

The levy is payable by the holders of timber permits, forest clearance authorities, timber authorities and licences, and shall be remitted to the Papua New Guinea Forest Authority at the point of export prior to clearance of the vessel.

Failure to comply with this notice will render the holder liable to penalties as prescribed
      
           Determination of Issues
11.	 We deal with the main issues that I have discerned from the arguments of the parties. Those issues pertain to what we describe are the essential elements or ingredients of an “imposition of taxation” required by law. 

(1)	What are the essentials of a “levy”  or  “ taxation” under s 209 (1) of the Constitution?

12.	 Section 209 (1) of the Constitution does not define or prescribe the essentials of an "imposition of taxation". They can be derived from the various taxation schemes prescribed by statute as those found in s 121 of the Forestry Act and principles of law governing taxation developed by the Courts in this country and those developed at common law by the English Courts which are adopted as part of the underlying law in this country: James Saleng Mileng v Alkan Tololo [1976] PNGLR 447. 
 
13.	  We gather from the arguments made by the parties those essentials to include these. The tax or levy is a tool used by the government to raise finance to fund its operations. The levy and the limits and conditions upon which the levy is to be paid and collected must be prescribed by a statute enacted by the legislature. The words used in the tax legislation must be clear and unambiguous. There is “no room for intendment.. no equity about a tax... no presumption as to tax...nothing is to be read in...nothing to be implied...One can only look fairly at the language used. And if there is a case which is not covered by the statute so interpreted that can only be cured by legislation and not by an attempt to construe the statute benovolently in favour of the crown" :  IRC v Hamidian- Rad (2002) SC692; Cape Brandy v Inland Revenue Commissioners [1921] I KB 64 at 71; Attorney-General v The Earl Selbourne [1902] I KB 388 at 396.The construction of words used in a tax law must be interpreted strictly and their ordinary and natural meaning ascribed to those words.: Noah Mairi v Alkan Tololo (No 2) [1976] PNGLR 125, IRC v Hamidian-Rad (2002) SC 692;  Mas International v David Sode, IRC Commissioner (2008) SC 944. Also see, Collins & Leahy Limited v. Collector of Stamp Duties (2001) N2150, Norah Mairi v. Alkan Tololo (1976) PNGLR 125, Misima Mines Ltd v. The Collector of Customs (2003) N2497, Chief Collector of Taxes v. Bougainville Copper Ltd (2007) SC853, Misima Mines Ltd v. The Collector of Customs & Anor (2007) N3206. The imposition of a levy remains in the absolute control of the legislature and far removed from the control of the Executive. The law must authorise the executive to collect and expend the levy for a clearly stated public purpose but the imposition of the levy itself and the limitations and conditions under which the levy is paid and collected are matters for the legislature alone to prescribe by statute.   The levy must be for a clearly stated public purpose and form part of the revenue raising and expenditure of the National Government or a public body, instrumentality or agency of the Government. The levy must require a fixed sum of money to be paid at a fixed rate by a prescribed tax payer as a condition of obtaining a licence, authorisation or permission to carry out an activity specified by law. The taxable item, the rate of levy, the method of its assessment, the limit of the amount of the levy, the rate or formula by which the levy is assessed and calculated specified, the time within which the levy is to be paid, the procedures by which the levy is to be paid and collected are all matters for the legislature to prescribe by statute. Monetary and penal sanctions must be prescribed for defaulting taxpayers. 
        
(2)	Is a ”levy” in s 121 of the Forestry Act a form of "imposition of taxation" within the meaning of that expression in s 209(1) of the Constitution?

14.	The expression "imposition of taxation" is not defined in the Constitution. The word "taxation" is defined in Schedule 1.2.2 of the Constitution to mean “rates, charges and fee and imposts of any kind”. The word "taxation" or "imposition of taxation" in s 209 has the same meaning.  I accept the applicant's submission that  applying the ”ejusden generis” principle of statutory interpretation, a “levy” under s 121 of the Forestry Act falls within the term "imposts of any kind" provided in Schedule 1.2.2.  It is accepted that "taxation" has a broad meanings and different words are used in tax language and used interchangeably to describe the different forms of tax.  Whatever the word used, whether tax, fee, rate, toll, levy and the like, an imposition of tax burden occurs: Gosling v Veley 7 QB at 407 per Wilde CJ, cited in Attorney-General v Wilts United Diaries Limited (1921) 37 TLR 884 at 885 and cited by Frost CJ A similar approach was adopted by the Supreme Court in Mairi v Tololo and Ors [1996] PNGLR 125. The word taxation in s 209 (1) of the Constitution has been broadly interpreted by this Court to include education fees or economic fees charged by schools:  James Salem Mileng v Alkan Tololo [1976] PNGLR 447; Mairi v Tololo and Ors [1996] PNGLR 125.

(3)	Is a timber export “levy” in s 121 of the Forestry Act 1991 and s 233 of the Forestry Regulations within the meaning of “an imposition of taxation .. by an Act of the Parliament” in 209(1) of the Constitution? 

15.	 There was no clear submissions of the parties on this issue. In my view, the imposition of a log export levy in s 121 of the Forestry Act 1991 is an "imposition of taxation ... by  Act of the Parliament" that comes under  s 209(1) of the Constitution.  The levy is imposed to assist the PNGNA, an agency or instrumentality of the National Government, to finance its operations. 
.    
(4)	Does  a long export  levy under s 121 of the Act come within the meaning of "the raising of revenue and expenditure" of the National Government in s 209(1) of the Constitution?
 
16.	It follows from our answer to issue (3) that the log export levy is imposed to raise finance to assist the PNGNFA, an agency or instrumentality of the National Government, to fund its operations. Section 121 of the Act comes within s 209(1) of the Constitution. 

(5)	Is the imposition of a log export levy to fund the operations of the PNGNFA an imposition of taxation fall outside of the National Government's Budget scheme provided in s 209(2) of the Constitution?  If so, is that permitted by s 209 of the Constitution? 

17.	The applicant misapprehended the importance of this issue and made submissions in passing on the issue. The respondents made forceful arguments on this issue which we set out first.  

18.	The respondents argue that Subsections (1) and (2) of  s 209 of the Constitution should be read together and  as a whole and given a fair and liberal meaning so as to give effect to the intention of the Parliament.  Construed in this way, it is argued that s 209 places complete control over the raising and expenditure of finances of the National Government in the Parliament only for those matters to be authorised by an Act of the Parliament.  Subsection (1) places the "raising of finance and expenditure" under the control of the Parliament and Subsection (2) provides the budget and expenditure framework for the National Budget.  The National Budget features the National Government’s money plan for the coming and that the budget when approved by the Parliament results in the separate expenditure appropriations for the three arms of government. The National Budget is used to fund the National public services which includes Provincial Government services: SCR No. 1 of 1990: Reference by the Executive Council of the Enga Provincial Government [1990] PNGLR 532 at 547. The words “raising and expenditure of finance by the National Government” is revenue which is required to be paid into the Consolidated Revenue by law and the expenditure of which is “charged on the Consolidated Revenue by law…”: SCR No. 1 of 1990, supra, per Kapi J, at pp 551-552.  The raising of revenue and expenditure, the establishment of the General Revenue and the Consolidated Revenue are governed by the Public Finance Management Act: see s 5 and s 22. 

19.	The respondents argue that the log export levy scheme in s 221 of the Act falls outside of the imposition of taxation for purposes of the National Budget under s 209 of the Constitution. It is Parliament's prerogative to enact such statutes as it sees fit in the performance of its law-making power to enact any legislation of its choice,  to enact legislation that provides for collection of levies outside of the National Budget. The Parliament enacted the Part VI  ( s 119 -121AB) of the Act and s 121 in particular, to establish a revenue system for the forest industry outside of the national budget process and that is its prerogative do so.  
  
20.	The respondents argue that the intention of the Parliament is s 121 is clear and unambiguous. It provides a complete code covering all the essentials of taxation and this Court should not ignore the clear Parliamentary intent. The revenue scheme under the Act provides a log export levy to be charged on logs bound for export to be paid by forest industry participants who are the holders of timber permits, timber authorities and licences. Section 121 prescribes four areas in respect of which the levy may be imposed and empowers the Minister to choose amongst those areas by notice published in the National Gazette. Section 121 authorises the regulations to prescribe the items in respect of which the levy may be imposed, to fix the amount and rate of the levy and the manner in which the levy is to be paid and collected. Those powers were properly vested in the Minister and the Minister acted within his powers in determining those matters by notice published in the National Gazette. The Parliament has in the past established similar revenue schemes under statute schemes they have never been questioned: see  s 30 of the Mineral Resource Authority Act 2005 (production levy), s  9 of the Marine Pollution (Liability and Lost Recovery) Act 2013, s 24 of the  Kokonas Indastri Korporesen Act 2002 (management levy), s 105 of the Gaming Control Act 2007 (community benefit levy), s 7 of the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 export levy); and s 17 of the Cocoa Act (management levy). 

21.	For the foregoing reasons, the respondents argue, s 121 of the Forestry Act 1991 and the Minister’s determination under s 121 as published in the National Gazette are not inconsistent with s 209 of the Constitution. The question should be answered in the negative.

22.	The applicant agrees that it is within the Parliament’s law-making power under s 209(1) of the Constitution to authorise, by an Act of the Parliament, a revenue scheme outside of the National Government’s revenue raising and expenditure for the purpose of the National Budget process found in s 209. The applicant cited two examples of revenue schemes which are also cited by the respondents. Section 17 of the Cocoa Act 1981 authorises a “Management Levy”; and s 30F of the Copra Marketing Board Act 1993 authorises payment of a “coconut extension levy”.  Both legislations fix levy items, the amount and its limit, the rate, and method of calculation and payment and collection. With regard to the Cocoa Act, a “Management Levy” is payable at the prescribed rate on cocoa beans and cocoa products that are intended for export. Section 17 (2) of that Act provides that the management levy may be prescribed for different types or grades of cocoa beans and for different types of cocoa products. Section 17 (3) more importantly says the management levy “shall be calculated, paid and collected as prescribed”.  The Cocoa Regulations 1981 section 11 fixes the rate of the management levy in actual amounts to be calculated at K40.00/per tonne. The Regulation even goes further to give conversion factors for bean equivalent products. With regard to the Copra Marketing Board Act 1983, s 30F prescribes the coconut extension levy payable for copra of such an amount not exceeding 2 percent of the price per tonne of copra. The remittance of levy is prescribed under s 9 of the Copra Marketing Regulations 1985. The applicant submits in paragraph 8 of the applicant's written submission that these two statutes “ not only (have) a legislative framework that provides for the imposition of levy, but going further the rate, formula and limits to which a levy may be charged” and these are the sorts of revenue “framework envisaged by s209 (1) of the Constitution. Section 121 of the Act and s 223 of the Regulations fail to meet those standards and are therefore inconsistent with s 209 (1) of the Constitution. 

23.	  In our view, Section 209 f the Constitution places the responsibility for raising and spending finances for the National Government on the Parliament. The Parliament's power to authorise and control the imposition of taxation to fund the operations of the National Government is beyond doubt.  Subsection (1) vests a general power in the National Government to control the raising and expenditure of the finances of the National Government but only by an Act of the Parliament. Whatever the revenue raising measures may be, including the imposition of taxation, the National Government may adopt, those measures must be authorised by an Act of the Parliament. Subsection (1) recognizes the fundamental and critical importance of the imposition of taxation as a revenue raising avenue, amongst other revenue raising avenues available to the National Government, in order for the government to sustain itself. 

24.	 Subsection (2) is concerned with a specific aspect of the revenue raising and expenditure provision in Subsection (1). Subsection (2) specifically deals with the government's National Budget (money plan) for a fiscal year and recognizes the importance of the National Budget. Subsection (2)(a) authorises the Parliament to formulate the National Budget and seek approval of the National Parliament and expenditure to be authorised through appropriations made for the three arms of government.   Subsection (2)(b) treats the expenditure component of revenue separately and provides for separate appropriations for the three arms of government by an Act(s) of the Parliament. 

25.	 The question is whether the authorisation, by Parliament, by statute, for the use or benefit of the National Government or its department, agent or instrumentality, a revenue scheme outside of the National Budget, as that found in s 121 of the Forestry Act 1991, is permitted by a fair, liberal and purposive interpretation of s 209 and Subsections (1) and (2). Both parties in this reference agree that the Parliament can authorise a revenue scheme outside of the National Budget framework found in s 209, relying on previous statutes that have authorised revenue schemes outside the National Budget that have gone unchallenged. The respondents press that position and the applicant appears not to take any issue with it. The applicants are content with taking issue with the vesting of specific taxation powers on the Minister which they say offend against established principles of taxation and therefore the vesting of those powers and their exercise by the Minister are inconsistent with the meaning of taxation in s 209(1) of the Constitution. 

26.	It has been taken for granted to this day that in practice, the power to impose tax for purpose of financing statutory bodies outside the general revenue system of the government for the purpose of the National Budget rests with the Parliament.   Indeed the Parliament’s power to authorise the revenue collection and expenditure of statutory authorities that Parliament itself has established by statute has never been in doubt. The Parliament has by legislation established tax, fee or levy schemes in respect of many statutory authorities, some of which the parties in this reference have mentioned:  Section 17 of the Cocoa Act 1981 (“Management Levy”), Copra Marketing Board Act 1993 (coconut extension levy)  and  Section 30F of the Cocoa Regulations 1981 ( “coconut extension levy,  s 30 of the Mineral Resource Authority Act 2005 (production levy), s  9 of the Marine Pollution (Liability and Lost Recovery) Act 2013 (marine pollution levies), s 24 of the  Kokonas Indastri Korporesen Act 2002 (management levy), s 105 of the Gaming Control Act 2007 (community benefit levy), s 7 of the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 (export levy). The revenue schemes established under s 121 of the Forestry Act is in the same vein as the revenue schemes under these other statutes. 

27.	 We are of the view that Subsection (1) of S 209 of the Constitution permits an Act of Parliament to authorise a revenue system outside of the National Budget framework found in Subsection (2). The expression "the raising  and expenditure of finance by the National Government, including the imposition of taxation" is expressed in general  terms and that gives the Parliament  a wide power to authorise the imposition of taxation for the use or benefit of the National Government or a statutory body set up for governmental purposes, outside of the National Budget. Subsection (2) is specific to the National Budget process that features the presentation of the National Budget and the appropriations for the three arms of government that follows the approval of the National Budget. The revenue raising power given by Subsection (1) cannot be restricted to revenue for purposes of the National Budget only. To adopt a restrictive meaning to Subsection (1) would defeat the flexibility that the National Government should have in adopting various revenue raising and expenditure measures to finance the operations of many statutory bodies and authorities, that Parliament itself has established under statute to carry out a multitude of government functions and provide services from funds sourced from outside the National Budget. The National Budget which represents the money plan for the three arms of government would be, in our view, insufficient to cater for the functioning and operations of the many statutory authorities that operate out there today that enjoy some measure of financial autonomy to finance their operations.      

28.	For these reasons, we reject the first part of the respondent’s arguments that the imposition of taxation made under Subsections (1) of Section 209 of the Constitution is only for the purpose of raising revenue for the National Government for purposes of the National Budget provided for in Subsection (2) of Section 209 of the Constitution. The Parliament's law-making power concerning the raising of revenue through taxation is found in s 209 (1) and not to be found in the general law-making power of the Parliament found elsewhere in the Constitution.  

(6)	Does s 121 of the Act and s 233 of the Regulations confer on the Minister for Forest, a member of the Executive, taxing powers that are reserved for the legislature and therefore inconsistent with  s 209(1) of the Constitution?
  
29.	 On a close examination of s 121 of the Act and s 233 (1) of the Regulations, we are able to discern the essentials of the log export " levy” that Parliament itself has decided upon and those that Parliament has empowered the Executive to decide. 

30.	The Parliament has decided the following:

(a)	Defined the purpose of the levy: s 119 and s 121 (1)
(b)	Defined the four areas in respect of which the levy is to be imposed: s121 (1) (a), (b), (c), & (d).
(c)	Persons on whom the levy is to be imposed: all holders of timber permits and of timber authorities and of licences or such other categories of timber permits and of timber authorities and of licences: s 121 (2).
(d)	The payment and collection of levy to be prescribed by the Regulations: s 121 (3).

31.	The Parliament has vested on the Minister for Forests ,a member of the Executive, the power to determine, by notice in the National Gazette, the following:

(a)	The power to choose from amongst the four areas in respect of which the levy is imposed: The purpose of the levy was determined by the NEC in its decision dated 12 June 2014 to be for “specific management levy” to assist  PNGFA to self-finance its operations. (see the trial judge’s findings of fact, Fact No. (b).  

(b)	The power to choose other areas apart from the four specified in Sub-section (1) in respect of which a levy may be imposed: The word “but not limited to” appearing in s 121(1) gives the Minister the power to determine such other areas as the Minister sees fit.
 
(c)	The power to decide on the name and type of the levy and the forest or timber and timber product item in respect of which the levy is to be imposed. Section121 simply says “levy” and fails to describe the levy item.   By National Gazette notice G 280 dated 23 April 2015, the Minister determined the type of levy to be “on all logs exported" by holders of timber permits, forest clearance authorities, timber authorities and licences.

(d)	The power to decide the amount and rate of levy: amount and levy rate fixed at K20 per cubic meter of log export. This appears in the Gazette notice G 280 dated 23 April 2015.

(e)	The power to decide the time for the levy to be paid and how it is to be collected:  to be remitted to the PNGFA at the point of export prior to clearance of export vessel. (Gazette notice G 280 dated 23 April 2015.
 
32.	It is these vesting of the levy powers set out in the preceding paragraph that the applicant strongly takes issue with. 

33.	The applicant argues that Parliament must, by an Act of the Parliament, authorise the imposition of taxation in clear and unambiguous terms. The purpose for which the levy is imposed, the taxable item and the amount and rate of the levy and the procedures for payment and collection of the levy must be clearly specified or prescribed by the Act of Parliament. Section 121 of the Act fails to prescribe those essential matters and instead empowers the Minister to decide them by notice published in the National Gazette. The provision empowers the Minister to choose among four or even more purposes which are not specified in respect of which the levy may be imposed, the type of levy, the levy item, the rate and amount of levy and the procedure for payment and collection and to be levied.  Those powers are wide-reaching and gives the Minister unfettered discretion. Therefore, s 121 is bad for ambiguity and is inconsistent with s 209(1) of the Constitution.  

34.	The applicant argues s 233 of the Regulations, instead of fixing the levy, empowered the Minister to determine the levy, the power to fix the limit of amount of the levy, or the formula as to how the levy is to be calculated.  The Regulations fail to prescribe the persons liable to pay the levy and the method of payment and collection. Section 233 of the Regulations prescribes the method of collection of the levy but falls short of prescribing the method of payment. 

35.	The applicant refers us to two statutes which make clear and adequate provisions for such matters and s 121 of the Act and s 233 of the Regulations fall short of the sort of provisions made in those other statutes: s 17 of the Cocoa Act 1981 (“Management Levy”) and s 30F of the Copra Marketing Board Act 1993 (“coconut extension levy”).  They argue that these other statutes “ not only having a legislative framework that provides for the imposition of levy, but going further the rate, formula and limits to which a levy may be charged” and these are the sorts of revenue “framework envisaged by s209 (1) of the Constitution: see paragraph 38 of the applicant’s written  submission filed on 12 November 2015. Section 121 of the Act and s 223 of the Regulations fail to meet these standards and therefore are unconstitutional.

36.	The respondents argue that the levy scheme under s 221 of the Act is no different from the revenue schemes established by other statutes including those cited by the applicant. Under those schemes, the relevant executive body or Minister is given power to determine the type of levy, the rate and amount of the levy and the manner in which the levy is paid and collected. Those schemes   have never been questioned. We are referred to s 30 of the Mineral Resource Authority Act 2005 (production levy), s 9 of the Marine Pollution (Liability and Lost Recovery) Act 2013, s 24 of the Kokonas Indastri Korporesen Act 2002 (management levy), s 105 of the Gaming Control Act 2007 (community benefit levy), s 7 of the Coffee Industry Corporation (Statutory Functions and Powers) Act 1991 export levy); and s 17 of the Cocoa Act (management levy). The applicants submit, s 121 of the Forestry Act 1991 and the Minister’s determination under s 121 as published in the National Gazette are not inconsistent with s 209 (1)  of the Constitution. 

37.	In our view, the legislature's  complete control over the government's imposition of taxation on citizens, in a way far removed from the Executive, in the way s209(1) of our Constitution does, is widely accepted and entrenched in the Constitutions of democratic countries including Papua New Guinea that are founded on the common law legal system. Three main purposes come to mind. It recognizes, gives effect to and protects the National Governments absolute need of tax revenue as its main source of revenue to fund and sustain itself. Another purpose is to place a limit on the Executive government's power to impose tax by placing the control over imposition of taxation with the Parliament. Finally, it removes taxing powers from the Executive and serves to protect the citizens from the Executive from the imposition of tax burdens that are excessive, unnecessary or unreasonable.   

38.	Historically, the imposition of tax in the common law system in England tells of a long and bitter struggle between the Crown (the Executive) and its subjects. The Crown considered it to be its absolute prerogative to impose tax on its citizens at will to finance its activities. Tax burdens became an oppression. With the advent of democracy that saw the separation of powers between the executive and the legislature in the 1800s, the legislature comprised largely of ordinary citizens who pressured the Crown to relinquish its tax prerogative to the legislature. The Crown agreed. Parliament assumed complete control of taxing powers and enacted legislation to protect its powers and the citizens. The people's right to be free from the imposition of tax by the Crown was safeguarded by an Act of the British Parliament: UK Bill of Rights (1 William and Mary 2, c2 of England). PNG was spared this experience of the struggle between the legislature and the executive: Mairi's case, supra.  By the time PNG gained Independence (1975) and established the Constitution, the law in the United Kingdom had changed to what is now reflected in s 209 of the Constitution. 

39.	 The Parliament, through s 121 of the Act and s 233 of the Regulations has vested on the Minister for Forests wide powers in respect of some of the essentials of the imposition of a levy that Parliament itself is required to possess in order to maintain its authority, control and regulatory powers over the imposition of levy.  Those essentials are set out in paragraph 25 above. By divesting itself of the power to make those decisions through legislation, it has vested in the Minister the absolute power to determine those essentials. Chief amongst them is the power to determine the levy item, the amount and the rate of levy. These are essentials of taxation that are ordinarily reserved for the legislature to prescribe by an Act of the Parliament.

40.	The vesting of wide and ambiguous taxation powers on the Executive to make decisions on essentials of the imposition of taxation in the form of a levy of the type found in s 121 of the Forestry Act 1991 and s 233 of the Forestry Regulations, cannot be Constitutionally justified. The vesting of such power in such manner is dangerous and could lead to abuse of taxing power and infringe on the rights of citizens to be free from tax burdens imposed at the complete discretion and whim of the Executive. Imposition of log or timber and timber products could change at the whim of the executive, at varying frequencies, amounts, rates and period depending on the operational and other demands of a statutory authority at any time. Timber operators could be made to pay higher levies for a range of levy items depending on the demand for more revenue from statutory authorities to cover high running cost of statutory bodies and authorities that would go unchecked by the Parliament. Statutory authorities and bodies nowadays appear to be accustomed to high running costs as a result of expanding bureaucracies which in turn trigger demand for more and high costs office accommodation and high accommodation and utility bills that escalate each year. As a result heavy tax burden could be placed on timber operators to fund those operations and drive them out of business.  An example is the case at hand with s 121 of the Forestry Act 1991. The imposition of a log export levy   of a sizeable amount (K20 per cubic meter) of logs appears to be excessive. This amount and rate could increase any moment.  It remains open for the Minister to decide in which of the other three the three areas specified in s121(1) or any other area of his choosing a levy may be imposed.  When s209(1), interpreted in the way we have done, requires the essentials of imposition of taxation to be determined by an Act of the Parliament, the necessary control is put in place, opportunity for abuse of taxing powers by the executive are prevented and the rights of taxpayers safeguarded. Section 121 of the Forestry Act as a whole and s 233 of the Regulations are inconsistent with established principles of imposition of taxation or levy under s 209(1) of the Constitution. They empower the Executive to make decisions on the essentials of imposition of taxation. In the case of s 121 of the Forestry Act 1991 and s233 of the Forestry Regulations 1998, the Parliament has acted contrary to s 209 (1) of the Constitution by removing the power to authorise and control the imposition of taxation or levy and instead vesting that power on the Executive in a way that is inconsistent with s 209(1) of the Constitution.     

Summary of conclusions on issues in the Reference

41.	In summary, we are of the opinion that the s 121 of the Forestry Act is a statute enacted by Parliament that authorises the imposition of a levy for the purpose of the raising of finance and expenditure of the National Government to finance the National Forestry Authority, a statutory authority or instrumentality of the National Government. The provision comes within the terms of s 209(1) of the Constitution. However, the Act removes the Parliament's authority and control over the imposition of log export levy in essential areas of the imposition of levy and vests those powers in the Executive through the Minister for Forests. Some of those taxing powers are expressed in wide and ambiguous terms. Therefore, s 121 of the Forestry Act and s 233 of the Forestry Regulations are inconsistent with s 209(1) of the Constitution and must be declared unconstitutional and invalid. 

Answers to Reference Questions

42.	For the foregoing reasons, we answer the questions in the following manner: 

Question (a): Is the imposition of a levy under Section 121 of the Forestry Act 1991, an imposition of taxation within the meaning of Section 209 of the Constitution?

Answer: Yes

Question (b): And if in the affirmative, is Section 121 of the Forestry Act 1991 inconsistent with Section 209 (1) of the Constitution of Papua New Guinea and therefore unconstitutional, void and of no effect in its entirety?

Answer:  Yes
 
Question (c ): If in the affirmative, are any or all notices and actions by the Defendants, including but not limited to the Notice of Levy under Section 121 published in the National Gazette No. G280 dated 23 April 2015, at page 1 and the Ministerial Notice of Levy under Section 121 issued by the First Defendant dated 16 April 2015, inconsistent with Section 209 (1) of the Constitution of Papua New Guinea and are therefore unconstitutional, illegal, and of no effect?
        
        Answer: Yes

Cost Order

43.	 We would order that each party bear their own costs of these proceedings.
________________________________________________________________
Leahy Lewin Lowing Sullivan Lawyers: Lawyer for the Applicants
Bradshaw lawyers: Lawyer for the First and Third Respondents