IRC and Customs must act on strengthening government finances

TAX collection in PNG is understood to be a cumbersome exercise under current bureaucratic and legislative environments.
And this is exacerbating a weakened government finance as indicated by higher debt levels, fall in the creditworthiness on the World Bank and Standard and Poor’s Credit Ratings, lack of liquidity in the government financial system and deteriorating physical infrastructures.
The Internal Revenue Commission (IRC) is not doing enough to collect tax and integrate with the Investment Promotion Authority (IPA) and Customs and comply to legislation in PNG as well as abroad.
According to the PNG Manufacturing Council, the tax gap in PNG is around 95 per cent  and further understated by other forms of non-compliance like under invoicing, smuggling and misreporting of quantity.
If somehow the tax collection procedures are improved and the IRC realise a zero tax gap, current tax revenues are likely to soar by an estimate multiple of 19 and this is a huge amount of revenue which is currently siphoned off the public financial system.
To add salt to the wound, the government does exercise tax exemptions on certain transactions which includes procurement of materials for large and significant resource projects.
As a case in point, in May 2009, the Gas Ministerial Committee (a sub division of the so-called “Kitchen Cabinet”) has knocked off 10 per cent of import tariff on all procurements destined for the PNG LNG Project and this in reality should have amounted to billions of Kina in government revenue however, it was freely given to the developers.
The ripple effect of this decision was the “resource curse” and lack thereof for any economic mitigation which has resulted in the unmanageable appreciation of the exchange rate and the damage caused on indigenous sectors and the entire economy between 2010 and 2015.
Since then, perhaps the economy has waded off the effects of the “resource curse” and the decisions of the past government and it is likely to grow but the government needs to implement the right mix of economic policies that will provide long term security and prosperity for everyone.
Remember an economy will only grow – double, quadruple and multiply at the back of a right mix of economic policies.
At the moment, the government can’t increase the various taxes like what it recently proposed to do as there is dissent among industrial and consumer groups.
So it only needs to improve the collection procedures to ensure that stability and optimism are protected and promoted while tax revenue is increased.
This will also ensure that economic shocks are cushioned and the objective to strengthen government finance is accomplished.
Though it will cost the government to provide the improved tax collection procedures, the benefits will far outweigh the cost considering new employment opportunities for tax personnel and the amount of revenue that will flow in.
Therefore, the government through IRC and Customs, should embark on activities that will ameliorate the current tax collection procedures and importantly strengthen government finance in the long run.

Mike Haro, Via email