Relax banking laws for SMEs

THE Government has recently applauded itself for its part in developing Papua New Guinea’s Small Medium Enterprises (SME) sector.
This can be seen positively.
However, there are major issues hindering the sector’s progress which the Government is intentionally or unintentionally forgetting.
Firstly, most small and medium businesses are owned and managed by semi-literate people, who have no business management experience. These people should be assisted to grow and be successful.
Currently, even before getting started, small businesses are told to register with the Investment Promotion Authority (IPA).
Then they are told to get a Tax Identification Number (TIN) with Internal Revenue Commission (IRC) so they can open a bank account to pay their taxes.
It seems that the SMEs are being prepared merely to pay taxes and pay management fees to the banks.
SMEs will never succeed this way. Before they even earn enough to grow their capital base or expand, any little toea being raised by them would be removed by the banks and the Internal Revenue Commission – through the payment of taxes.
For these reasons, I am asking the Government to give SMEs a three year incubation period, in which to pay no tax, grow their business and expand.
As for IPA registration, they should be given only a three year probationary registration after which they can then register to pay taxes and whatever the Government wants from them.
Within the three year period, they shouldn’t be required to have a tax identification number as they are on a three year tax holiday.
Other incentives the government can provide include less tax for every kina re-invested in their business and paying them a bonus for every new employment opportunity created by SMEs.
A bigger business is able to pay a higher tax than a small-medium business – which is struggling to grow and expand.
Moreover, it can employ and pay a much higher tax than one which is struggling.
Hence, the Government should offer some incentives to the SMEs so that they can expand and employ more people who will pay more taxes.
The Government should offer some incentives to the banks to encourage them to invite/open bank accounts for SMEs.
From my experience, it is really a big struggle for SMEs to open bank accounts at the existing commercial banks.
As far as I am concerned, the banks are not experts in business but sucking other peoples money.
They should be proactive in encouraging SMEs to bank with them.

Dominic Eiso, SME Advocate
Siwai, AROB