THE Government is losing hundreds of millions of kina in tax revenue through both illegal and legal means, the Internal Revenue Commission revealed yesterday.
And tax revenue collection from the PNG LNG project looks really gloomy with substantial cuts to the IRC Budget for 2010 that will hinder tax collection.
This sad state of affairs was revealed yesterday to the parliamentary bipartisan committee investigating the riots against Asian-owned and operated businesses in May.
Senior IRC officers including assistant commissioner Hans Peter Kochannek, Brian Wilson, Iru Loi and Alois Daton appeared before the inquiry with a written submission.
The committee members led by chairman Jamie Maxtone-Graham and Sohe MP Anthony Nene asked whether IRC had records of tax evasion by businesses, especially small Asian-owned shops.
The committee also inquired about how much tax revenue was collected and how much was lost through false declarations and whether the IRC was ready for the LNG project.
The IRC officers admitted that hundreds of millions had been lost through tax evasion, false declarations and companies hiding their books from authorities.
Mr Kochannek said hundreds of millions were lost annually through non-compliance by companies in submitting their tax returns.
He said the IRC, because of capacity constraints, limited its checks to major corporate entities operating in the country.
“We collect K4 billion annually and percentage wise this is not right … we only do big companies.”
He said the IRC only scrutinised 200 “big boys” but it was very difficult to check the around 6,000 small businesses to collect taxes.
And with the LNG project coming into the construction phase next year, the IRC is not ready for it and to make matters worse, its budget for next year has been cut by K4 million, which will hinder tax collection efforts.
The senior officers told the inquiry that the IRC made a budget presentation of its funding requirements to deal with the LNG project before the budget was handed down on Tuesday but they were all taken by surprise by the drastic cut of K4 million next year.
Officers said this was raised with the secretary for Treasury Simon Tosali during the Budget lock-up.
They said Treasury and Finance Minister Patrick Pruaitch got the message and during his Budget breakfast with the business community in Port Moresby on Wednesday, he made a public statement that IRC would have to meet with Treasury for a review of their allocation.
IRC officers clarified to the inquiry that the Government lost tax revenue through both illegal and legal means.
They said tax concessions given by Government to projects were a fine example of losing huge chunks of tax revenue through legal means.
Committee chairman Mr Maxtone-Graham, in concluding the inquiry, said the tax concessions must be critically relooked at and urged the Government not to give away concessions.