Find ways to catch tax cheats

Editorial, Normal

The National, Monday May 11th, 2015

 TAXPAYERS in Papua New Guinea are continuing to foot the huge bill for illegal businesses and tax cheats.

The recent revelation by the Taxation Review Committee that PNG has become a paradise for illegal businesses to operate without paying taxes is a big slap in the face for companies and employees who work hard to contribute to the Government coffers. 

The committee described the illegal business operations as a “huge black economy”, which involved money laundering.

It is cause for grave concern among many companies that slog throughout the year to keep their businesses afloat and pay their taxes to the State.

By the same token, thousands of workers feel cheated by a government system that forces them to pay taxes but does nothing to prevent unscrupulous people from evading taxes. 

It’s not fair that genuine employers and employees in both the public and private sectors have to earn their keep and pay their dues while tax cheats continue to thrive in this country.

According to the Taxation Review Committee, these businesses evade taxes simply because they are not registered.

So who is responsible for the failure to detect unregistered or illegal businesses? Is it the Investment Promotion Authority (IPA) or the Internal Revenue Commission (IRC)?

The Investment Promotion Authority (IPA), through the Companies Office, is responsible for the administration of PNG’s key business laws such as the Companies Act, Business Names Act, Business Groups Incorporation Act and the Associations Incorporation Act.

There are other laws and regulations which will affect investors. These include laws on areas such foreign exchange, taxation and customs, licences and permits for various activities such as mining and petroleum exploration, agriculture, fisheries, forestry and industrial activities.

Provincial governments and urban authorities issue various licences. It is the responsibility of investors to ensure they comply with the respective laws as well as the Investment Promotion Act 1992.

The Companies Office maintains a national registry of all companies, associations, business groups and business names in PNG.

Failure to comply with the legislations administered by the Companies Office may result in administrative penalties or prosecutions that may follow jail sentences or fines or both against company officials and the company itself.

The latter can only be fined. The company can be deregistered. The nature of penalty, whether administrative or others, and deregistration of a company depends on the severity of the offences.

The IPA can only deal with legal businesses that fail to comply with key business laws such as the Companies Act. 

On the other hand, the IRC is responsible for collecting revenue for the State through company and personal taxes. 

The IRC imposes taxes on legal businesses that are registered by the IPA and can only deal with infringements of the taxation laws by these companies.

The issue of tax evasion by illegal businesses or unregistered companies is the grey area that needs to be investigated and dealt with by relevant government authorities, including the IPA and IRC.

PNG is losing billions of kina every year, according to the Taxation Review Committee, which has made recommendations to the Government to identify those illegal businesses that are not paying taxes and generate extra revenue from that. The committee aims to modernise the PNG taxation system by streamlining and rationalising the current tax and revenue administration. As well, it will embrace the use of information technology to speed up the process and help in the assessment of taxes.

All of these sound swell but taxpayers throughout the country will hope that the committee sticks to its assurance that it will not raise taxes but find ways to decrease or eliminate taxes for people earning K1000 or less per fortnight.

That would be a blessing for many hardworking employees and their families.

As it is, ordinary wage earners in PNG are heavily burdened by all kinds of taxes and the current taxation review will be a pointless exercise if it were to take more money out of their pay packets.