Business focus on taxation

Business, Normal

The National, Monday February 17th, 2014

 BUSINESS in Papua New Guinea is now starting to focus on the possible result of the taxation review that could have major implications on commerce, trade and industry, including the country’s resources sector.

With the government targeting an additional revenue of K585 million (US$229 million) through the Internal Revenue Commission (IRC) this year, the pressure is on to improve the way the country is taxed.

The taxation review would look at competitiveness and efficiency in PNG’s current tax system and non-tax revenues and identify opportunities for greater fairness and simplicity.

It would also look at ways of improving compliance and outline possible changes to the country’s tax mix.

Submissions to the review have been invited, with a deadline on March 31 for those in mining and petroleum and April 30 for other submissions.

Business entities such as the PNG Chamber of Mines and Petroleum, the Manufacturers Council of PNG and the PNG Chamber of Commerce and Industry had advised Business Advantage PNG they were currently planning submissions to the review.

Taxation Services at Deloitte PNG partner Bouke Wagenaar said the government would be looking to collect more tax from businesses to fund tax breaks for the masses.

Instead of new taxes, an improved focus on the efficient application of existing tax rules would be desirable.

“This isn’t a legislative issue. PNG has a lot of sensible rules but they’re not necessarily applied effectively. 

“If they can ramp up the IRC, make it more efficient and make sure people who should be registered to pay tax are registered, that would make a big difference.”

Wagenaar said the IRC had already taken some steps to improve matters, through the introduction of new technology and an internal re-organisation.

But, he added that there was a way to go before the tax system benefits fully from technology.

“At present, the new system only covers withholding tax and only the largest tax payers are on it,” he said.

Technology can have a downside too, however: there are concerns that automated work processes at the IRC could lead to penalties being applied much more often than is the case today.

Deloitte and KPMG were just two accounting firms currently consulting with clients to make their own expert submissions to the review, while PricewaterhouseCoopers had already lodged a number of submissions, according to Partner David Caradus.

Wagenaar’s advice to business people was to provide feedback to the review on the experience of complying with the current tax system : 

“As a community, there’s an opportunity to let government know our perception of how things work and what’s important to us. 

“We can’t just expect them to know. We need to make sure business is taken into account.” – Business Advantage