Ilegal businesses costly to PNG

Editorial, Normal

The National,Monday March 14th, 2016

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

Recent revelations 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. 

And to add salt to injury, a senior government official revealed last week that some countries in the Asia Pacific region had potential money laundering activities associated with PNG.

The official, who is involved in the Anti-Money Laundering and Counter Terrorist Financing committee, says money laundering involves illegal activities such as illegal logging, illegal fishing and human trafficking or people smuggling. Proceeds from these illegal activities that are put into legitimate businesses is money laundering.

While this government committee is determined to pursue people and businesses involved in money laundering operations, other illegal businesses continue to cause problems for the country through tax avoidance.

The Tax Review Commission has described these illegal business operations as a “huge black economy”, which also involves money laundering.

It is indeed 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.

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 IPA’s Companies Office is responsible for the administration of 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 also affect investors. These include laws on areas such foreign exchange, taxation and customs, licenses and permits for various activities such as mining and petroleum exploration, agriculture, fisheries, forestry and industrial activities.

Provincial governments and urban authorities also issue various licenses. 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. Also 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.

All of these sound swell but taxpayers still hope the Government will not further burden them with increased levels of personal income taxes. That would be a blessing for many hardworking employees and their families.

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.

It would indeed be in the Government’s interest to keep a tight lid on income tax increases in view of the 2017 general elections.