Tax policy

THE tax policy sets out the various rates applicable to the production and sale of goods and services in Papua New Guinea or abroad.
The fiscal policy sets out the sources of revenue and how the Government will spend it in PNG.
The Government imposes the various tax rates provided in its tax policy to raise the required revenue to fund the annual National Budget.
In designing and implementing the tax policy and fiscal policy, the burden of tax on the tax payer, development outcomes, and governance, become very critical considerations.
The tax policy imposes a burden on the tax payer whereas the fiscal policy influences the development of PNG.
The current tax policy favours natural resource companies operating in mineral, petroleum, gas, fisheries, and forest industries in PNG.
Companies in these industries are aggressively reducing their tax burden, by declaring annual financial losses, or offsetting or recovering taxes paid against their financial losses or advance tax payments, or obtain an exemption from paying taxes from the Government.
Some of these industries have also secured lower company income tax rates from the Government and are now paying lower corporate income taxes.
Project development agreements (PDAs) are now the prominent vehicle by which these natural resource companies are reducing their tax burden, and have fragmented and distorted the tax policy in PNG.
Access fee arrangement in the fishing industry is another example whereby marine catches are exported and processed overseas for sale, without any corresponding tax payments to the Government and development spin-offs in PNG. The design and implementation of the currency tax policy is having a serious negative impact on the development of PNG and governance in the following ways.
First, it encourages the wealthy and powerful to shift money abroad to benefit their shareholders and corporate executives, while paying very little or no taxes to the Government.
Hence, the Government cannot generate sufficient revenues to fund the national development priorities through the National Budget.
Second, the individual tax payers are bearing the full burden of the tax policy, by paying a disproportionately high personal income taxes every fortnight and goods and services tax (GST) each time they go shopping, to fund the National Budget.
Third, the governance arrangement between fiscal policy and monetary policy is being undermined and compromised by the Government, with funding of the fiscal operations by the Bank of PNG.
Finally, the provisions of the National Constitution requiring equal distribution of wealth and participation in the development of natural resources by the citizens of PNG has been seriously undermined and compromised by the tax policy, PDAs, and Government.
As a result, PNG is experiencing very challenging development issues such as high unemployment, increasing law and order problems, low life expectancy, poor quality of education and health services, and the run down state of the country’s critical infrastructure for development.
The Government must take immediate measures to correct this inequality in the sharing of tax burden facing individual and corporate tax payers in PNG.
It must start by re-negotiating the PDA for the Papua LNG Project and negotiate better terms for the Wafi-Golpu Project PDA.

Concerned Citizen – POM