THE dominant concept in economics is an issue of competition, which the Independent Consumer and Competition Commission is responsible for.
The prudential requirements of the Bank of Papua New Guinea is to address the issue of systemic risk to the financial system.
Therefore, the economic and commercial rationale for the Government to approve the introduction of dominant banking and communication company tax remains unclear and unknown.
The tax will result in the serious economic and commercial consequences as well as on equity and fairness considerations.
The current policy initiative of the Government to bring the large unbanked rural population to the formal banking system will collapse and become a thing of the past as operating cost will increase.
The tax will discourage potential new entrants to the communication and banking system.
As a result, competition in the banking and communication services will significantly diminish.
Communication and banking services will be rationalised or curtailed due to an increase in the cost of providing the services.
Interest rates and bank account fees will increase.
These will be passed onto the consumers of communication and banking services.
When interest rates and bank account fees increase, they will increase the cost of doing business in the country.
It will lead to a decline in economic activity as potential and existing investors roll back on their investment plans.
The Government will become a victim of its own decision/policy because tax revenues will fall as a result of a decline in economic activity.
The State-owned dominant enterprises are not performing well and generating dividends for the Government due to poor management and Government control.
Yet, the Government wants to tax well-managed and profitable privately-owned dominant service providers.
There is no equity and fairness of this banking and communication tax.
The extractive resource sector (mining, oil and gas) generates and shifts so much revenue out of PNG.
The Government does not have the tax audit capacity to collect tax revenues from the multinational corporations of the sector.
Yet, the it is content with proving more tax concessions to this sector while not generating significant revenues from it.
Again, there is no fairness and equity in the banking and communication tax.
The Government must immediately abolish entirely the tax on dominant banking and communicating service providers as they provide vital services for economic growth and development.