Govt warned against tax hike

Business

By Lemach Lavari
Increasing tax rates on companies in the extractive industry will not necessarily result in more Government revenue, says a taxation expert.
Papua New Guinea’s tax rates on mining and petroleum companies are high compared to other countries, according to Deloitte Touche Tohmatsu’s tax and business services principal Declan Mordaunt.
He said PNG had great wealth in resources but the high tax regime was a key factor that held back investors from doing business in the country.
Mordaunt said corporate tax (30 per cent), dividend withholding tax (15 per cent) and foreign contractor withholding tax (15 per cent) were higher in PNG than in other countries such as United Kingdom, New Zealand and Ireland.
“When you push your tax rate up, it does not necessarily get you more tax,” he said.
“Tax is a disincentive, so companies make fewer profits when they have to pay more in tax.
“When it (tax) is down, people invest and make more profits.
“More profits on a lower tax rate gets you more tax.”
Mordaunt said investors looked at risks and rewards of any project before investing.
According to the World Bank’s Ease of Business Report, PNG is ranked 109th out of 190 countries, in terms of ease doing business.
Mordaunt attributed this rating to high taxes, poor infrastructure and an already high government take from gold mines.
He said PNG was richer in terms of minerals compared to New Zealand and Singapore, but the ease of doing business in those countries was far greater. Mordaunt said effective Government fiscal and regulatory policies would play a strong role in making PNG attractive to investors.