Executive highlights PNG’s tax collection shortcomings

Papua New Guinea has one of the lowest tax collection rates in relation to economic activity or gross domestic product, says Paul Barker, executive director of Institute of National Affairs.
He said this was not only from the resource sector but also other economic activities.
“This poses a challenge both in formulating revenue measures, but also tax and customs collections.”
During the National Broadcasting Corporation press club in Port Moresby yesterday that much of the tax burden had been falling on a small portion of households earning above the threshold in the small formal sector, Barker said.
“Only about one sixth of working-age citizens are in the formal workforce, and only a portion of them are above the threshold, the largest single slice of revenue, or about one third in the recent years is coming from some 200,000 individuals, many working for government and some in the mining sector, he said.
“Perhaps surprising, the largest revenue contribution from the extractives, by far, comes from employees taxes. GST (goods and services tax), which has provided the biggest growth over the past decade, particularly during the early years of the LNG construction phase, has helped plug the budget gap from the resource sector.
“It now provides roughly equivalent non-mining company tax, which has been sluggish. But GST also suffers poor collection rates and relatively flat formal economy in recent years and high level of informal and so-called ‘unregulated’ trading result in much foregone revenue.”
Barker had earlier said that PNG had one of the highest tax rates in the world.