People deserve fairer tax system

 WHAT many a wage earner may have only longed to tell the National Government was articulated by the director of the National Research Institute, Dr Thomas Webster, this week.

Papua New Guinea’s personal income tax is among the highest in the world, is unjust, unfair and needs reviewing. That is not from The National but the NRI.

Some may disagree with the views of our leading think tank. The following are direct quotes from Webster’s speech at the launching of a report on taxation. 

“The present state of taxation in this country is unjust and oppressive to the formal wage earning income earners.  The middle class are subject to very high income tax but they pay VAT through the goods that they purchase and they are dependent on those goods for a living.

“Personal income tax is one of the highest in the world, with the marginal tax at 42% compared to the  global average of 31%.  And the average in Asia is about 28%.

“Many advisers and tax consultants compare PNG’s tax regime with Australia and UK but we have different social and environmental circumstances.

“In PNG, wage earners pay tax as well as look after their wantoks and relatives for school fees, health and the aged. In Australia and the UK, people pay tax and the government takes the tax money and looks after the relatives, those who do not have enough income, etc. In Papua New Guinea, we pay a high income tax to similar level to Australia and UK and yet we take on the tax burden of looking after our wantoks and relatives. And this is quite unjust and unfair.”

In essence, Webster has said it all for the suffering wage earner. 

The NRI has asked the Government to consider reducing personal income tax.

The NRI’s report was compiled for the tax review committee headed by a former Internal Revenue Commissioner, Sir Nagora Bogan. One other important recommendation made in the NRI report was to do away with tax incentives for companies.

The NRI argues that in exempting companies from paying taxes, there is a corresponding tax burden which is passed onto the al­ready over-taxed wage earner. 

This does affect the non-wage earner struggling with a limited purchasing power.

“If Papua New Guinea is losing out on much needed revenue then the tax burden is unfairly passed onto the taxpayers because somebody else is not paying.

“We are therefore strongly recommending that these tax incentives should no long be offered in the future,” Webster said.

The NRI recommendations, however, cannot be simply implemented but will take further deliberation by policy makers. And the government would have to objectively deliberate the recommendations put forward in order for it to make tax laws.

One thing the NRI report may achieve if it does get amply circulated to the public, is that it would draw informed debate from all sectors of society on the country’s tax laws and policies.

The PNG tax legislation may have been based on the Australian and British models but unfortunately has scant regard for the social and economic realities some of which were alluded to by the NRI director.

These and other consideration constitute any further discussions to form a more just, fairer tax regime.

Government expenditure and accountability have a crucial bearing on how the wage earner views taxation in general and personal income tax in particular.

The current debate on taxation may be concerned with reforms to the existing regime with a view to make it fairer and more just to all sectors of the economy.  

In a simplistic view, a lot of today’s wastage and misuse of public money raises scepticism about taxes.

The taxation debate and eventual resultant legislative changes will no doubt bear positive some outcomes for the PNG economy.

Wage earners are not only worried about how much they pay but whether their taxes return to them in improved service delivery and quality of life. It is fair for them to ask for nothing less than prudent spending and strict accountability on the part of government.