Report suggests leaner tax incentive for extractive sector

By Lemach Lavari
A PRELIMINARY research report by the National Research Institute has recommended leaner tax incentives for the country’s extractive resource sector.
Monash University researcher Dr Diane Kraal said the report was to find out whether the tax incentives by the PNG government were beneficial economically. The report, compiled by Kraal and Dr Francis Odhuno of the NRI, concluded that tax incentives should be made leaner to the extractive industry to allow for more funds to be spent elsewhere.
It highlighted that the government sought to attract foreign direct investments through tax incentives. However, the rise and fall in foreign direct investment was attributed to prospectivity. It found that there was no connection between the foreign direct investment and tax incentives.
“From a company’s perspective when looking for resources to extract, they look at what the returns would be,” Kraal said.
“They look at the prospects of how they can make a profitable return. How easy it would be to extract the resource, the quality of the resource, the political environment and the availability of workers. These are factors looked upon well ahead of tax incentives.
“When we tried to draw a nexus between tax incentives and investment activity, there were no indicators that jumped out.
“So, the foremost concerns of foreign investors is prospectivity and the demand for the commodity.”