By PETER ESILA
SHAREHOLDERS will be mostly affected if the Government introduces the additional profit tax on banks, Bank South Pacific chief executive Robin Fleming says.
Fleming made the comment when asked what his thoughts were on the Government’s announcement to review bank licensing fees and additional profit tax on banks during the presentation of the 2020 National Budget last week.
He said BSP was the only predominantly-owned PNG bank and its ownership was almost 90 per cent Papua New Guinean. Fleming said its shareholders included Kumul Consolidated Holdings, Nambawan Super, National Superannuation Fund, Motor Vehicle Insurance Ltd, Petroleum Resources Kutubu and many other PNG shareholders.
“Each of these shareholders would receive lower dividends if an additional profit tax was introduced, which does not appear equitable,” he said.
“It may also mean that investors look to move from a higher taxed industry to an industry that is taxed at a lower rate.
“It needs to be recognised, firstly, that the more profitable a business is the more tax, it contributes more to consolidated revenue by virtue of the fact that the percentage of tax that is paid is based off a higher before tax profit.
“For example, if your net profit before tax increases from K100 million to K200mil our tax will be increasing from around K30mil to K60mil because your before tax profit is higher.
“From an equity perspective, leaving the resource sector aside for the purpose of this discussion, all businesses regardless of which sector they are in should be taxed at the same rate. Introducing a tax regime that is biased against more profitable industries does not provide any incentive for a business to strive to achieve higher profitability if the more successful it becomes in regard to profit before tax, its net profit after tax increases disproportionately at a lower rate.
“Every business has a responsibility to pay its taxes in a timely manner and to ensure that its tax calculations can stand the text of scrutiny from IRC but an industry should not be taxed a higher rate because it is more profitable.”
By PETER ESILA