FINANCE Minister Charles Abel, in recent report, has revealed that there is a gap in revenue receipts to the tune of K2 billion which is impacting on the government’s obligations to meet the 2019 Budget.
Indeed this situation appears to be confirmed by the number of government cheques being dishonoured by the banks in recent times, Gulf and East New Britain provinces to name a few with their K3 million and K5 million cheques respectively, of course with a new cheque reissued to Gulf governor on Friday last week.
Other provinces like Northern, Madang and Central had also been knocking on the government’s door for their outstanding payments requested to cater for the recent disasters in their respective provinces.
The treasurer’s recent state of the economy address revealed the lackluster performances by the various SOE’s and them paying the government very mediocre dividends.
One would wonder whether these white elephants are at all operating or have they gone to sleep?
Obviously the country is now feeling the pinch as result of very bad policy decisions by previous governments (Somare and O’Neill), especially with regards to the oil and petroleum sector revenue earnings since 2014 for the PNG LNG project.
Notably as reported elsewhere, the developers of the PNG LNG project, and the government, created a complex web of exemptions and allowances, combined with generous tax concessions, that effectively meant that very little revenues is now being received by the government.
According to ExxonMobil PNG, it had since its production began in April 2014, paid the State about K5 billion so far to date for the government and landowners, mainly via taxes, royalty and other benefits payments.
Extractive Industries Transparency Initiatives (EITI) reported that more revenues had come into the government from personal income taxes paid by ExxonMobil PNG employees, than it did from corporate taxes from the company itself; why would such be allowed to happen here?
The anticipated annual revenues that the State is entitled to is however not paid directly to the government, but is paid into its stakeholder in PNG LNG project, the Kumul Petroleum Holdings Ltd (KPH).
And who knows where had all these monies gone to?
However, whereas KPH is supposed to be receiving about K1.4 billion annually since 2014 in revenues, it had only been paid a fraction of that amount, about one third, and this is all because of the bad policies that our past governments had made during early stages of the PNG LNG project negotiations.
The PNG LNG project production revenues has exceeded expectations according to reports, so why is the country short of revenue, at this time, five years on?
Receiving only one third of the anticipated full amount of revenue is seriously impacting on the budget and undermining the potential positive benefits of the economy.
The situation falls back onto the signed and executed Gas Agreement between the State and the developers which, established, one would infer, a one sided favourable tax regime and a legal framework which left loopholes which the developers have been able to take advantage of, hence the revenues shortfall.
The State should re-negotiate a new fiscal regime and legal framework agreement with the developers, to see that more revenues are flowing into the government for development purposes, if it desires to “take back Papua New Guinea” from the ongoing economic crisis.
It is no wonder there is definitely a gap of K2 billion in revenues now impacting on the government’s 2019 expenditure budget.