Barker: Debt level cannot be reduced overnight

National

The Government’s priority in restoring its revenue and reducing debt level to below the 30 per cent GDP maximum is critical, although the latter cannot be achieved overnight, Institute of National Affairs director Paul Barker says.
Barker said major progress required some more structural reforms, including fundamental shifts in tax rules and revenue administration, but they did send the right message.
He said it clearly required spending money to make money, further investment in revenue collection, including new automated mechanisms and for embracing non-compliant businesses, and undertaking tax audits at provincial level.
“The direct tax burden currently falls on a relatively small portion of households and businesses across PNG, and clearly needs to be extended,” Barker said.
“Indirect taxation, notably GST performance, is also currently poor, even by Pacific standards.”
Barker said greater transparency was needed in the negotiation and application of resource project agreements, including using the extractive industries transparency initiative processes, particularly applying standard conditions to avoid the sorts of deficient resource rent so apparent in PNG in recent years from the resources being extracted and exported.
“This must go together with implementing the Sovereign Wealth Fund, as planned, as part of the effort to iron out the excessive and associated fluctuations in revenue and expenditure, which badly undermine the delivery of sustained priority public goods and services,” Barker said.
“A quick win would be to unplug the bottleneck in land rental associated in recent years from deficiencies with data bases and technology, despite major ongoing contracts for upgrades.
“The Treasurer and his team have certainly been undertaking an intensive stakeholder dialogue in recent years to come up with a solid 100-day plan.
“Some parts are stronger than others, but it is largely based on establishing trust and credibility, and progressing through partnership and cooperation.
“The current weak and fragmented structure and capacity of public institutions undermines implementation capacity for quick delivery of results.
“This is partly the result of years of deficient investment in obtaining and using reliable data and poor recognition of the need for, and adherence to frank policy advice.”

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