System troubling revenue

REVENUE from the mining and petroleum sector dropped recently due to commercial agreements between resource companies and the Government among other reasons, Institute of National Affairs director Paul Barker says.
Barker said from 2010, the government was getting about K2 billion in revenue from mining and petroleum taxes which was about 20 per cent of the revenue coming from the mining and petroleum sector.
“That dropped away from 2010 to 2016 to being less than two per cent,” he said. He said the government thought it would make extra revenue from all those big resource projects like LNG coming on stream. However, the fall of commodity prices, particularly oil and gas, copper, and gold and agreements with some resource companies affected revenue.
“Because of the agreements that the government had with those resource companies, which allowed big gold miners to depreciate and to not pay taxes during certain years so that they can have advance depreciation and because of having 10 year tax holidays like the Ramu Nico project,” he said.
“So the government was banking on a lot of revenue, but it was not going to get it, partly because of the low commodity prices and partly because of the tax arrangements that the government had with those companies.
“It was not that the companies are breaking the law by not paying taxes although in some sectors some companies are doing illegal tax avoidance, but by far, large corporate companies are following the law but it’s the agreements with the government that allows that,” Barker said.
“So as a result of that, you could see a big drop in the level of revenue coming in from the resource sector.
“And by far, the major component of tax revenue that the government is getting comes from the salary and wages tax, and that is followed by companies’ taxes particularly in goods and services (GST) tax.”
Barker said some of the resource projects should be pumping more revenue to the state next year.