BSP: Tax bad for investors

THE new Additional Company Tax (ACT) will ultimately increase uncertainty and reduce investor confidence in Papua New Guinea, Bank South Pacific (BSP) Financial Group Ltd says.
Group chief executive officer Robin Fleming said the tax was introduced following the March 2022 sitting of Parliament.
“Consequently, the tax may well result in a further reduction in foreign direct investment (FDI) at a time when PNG needs increased FDI,” Fleming said.
According to the BSP Pacific Economic and Market Insight first quarter 2022 Report, Fleming said clearly the new tax would have a direct negative impact on BSP shareholders with the tax taken up in BSP’s first quarter results for 2022.
The report stated that BSP was also hearing concerns from the broader corporate sector about the arbitrary nature of the tax.
“This has resulted in a high degree of business uncertainty that may well reduce their appetite to make decisions on investments and capital expenditure as the tax sends a message to businesses not to invest and strive to be successful,” Fleming said.
He stated in the report that the new tax would also reduce the attractiveness of PNG’s banking industry, making it less likely that offshore banks would enter the PNG market. This would further reduce competition at a time when the Australia and New Zealand (ANZ) bank had exited PNG’s retail market, with the sale of its retail businesses to Kina Bank.
“The recent amendments to the Income Tax (Amendment) Act (2022) introduced significant change, with the Additional Companies Tax, based on a company’s market concentration and the one-time tax liability on Digicel of K350 million, appear arbitrary and will adversely impact future business investment decisions,” Fleming added.
“When confidence is up, customers are buying, sales are higher, jobs are created, inventory investments are made, capital expenditure increases, and business owners feel assurance that the future for their business looks bright, which then boosts economic growth.”