Recent tax hike is unrealistic for PNG

I REALISE that the recent tax hike proposed in the 2017 Budget will create more bad than good for the PNG economy.
The Government has vehemently projected various tax increases and notably on alcohol, tobacco and housing in the guise of propping up an already weakened government finance.
Seemingly impossible is that housing, tobacco and alcohol are highly taxed in the rates of around 75 per cent.
There is a grim picture of the economy as if the excise tax increase of 50 per cent on alcohol from its base and the one off increase in tobacco are implemented, they will “kill” the consumers and the manufacturing industry and further weaken important government revenue.
In perspective, housing, alcohol and tobacco each have very strong inelastic demands so whenever there is an increase in the level of excise tax imposed on each of their market prices, demand will respond at a rate fairly lower than the proportionate change in price hence, revenues will soar spur-off-the-cuff.
Moreover, there will be unintended outcomes impacting law and order and health due to the proliferation of black markets and an increase in the production, distribution and consumption of illicit alcohol and drugs as a response mechanism to rebalance supply and demand over the rate of the excise taxes on alcohol and tobacco.
This usually happens as an escape to the underground economy.
On the housing market, the imposition of the housing tax will be unrealistic to many homeowners especially at the top tier because it will encroach on the employer provided fringe benefits and employment standards such as the corporate policies to retain high calibre employees and instil work productivity thus negate economic productivity and the efforts to trigger efficient industrialisation.
However, the only way to redistribute this income is to discourage expensive pegs and privileges and instead allow the savings to be reinvested to ensure that housing mortgage and rental rates are eased and to increase affordability.
Speaking at the back of a government that is committed to grow the economy, a tax hike is unrealistic as it will bite deeper into the fruits of industrialisation.
So the Government should instead be more liberal in handing down policies that will trigger the growth of the private sector and that of the economy at large.
Policies should and must place the people at the helm as in a developed country, the people needed to be provided the incentives to be empowered and to make better contributions to the economy in terms of their productivity as well as their social status.
The people are an important element in the economy and many governments around the world have recognised and appreciated this ideology.

Mike Haro, Via email