Tax regime in Papua New Guinea

PAPUA New Guineans and companies operating in the country have been subjected to excessive taxes for the past 20-30 years.
This trend has become an accepted norm and the authorities seem to see taxes as the only way to sustain the national coffers.
Companies pass the tax pressures to consumers and clients.
In the end, the people are overtaxed, over-worked and underpaid.
There is indeed no such word as “savings” in the vocabulary of the working class.
Their pay packet is not enough to take the family to the next pay fortnight.
Many families end up in debt, and if continued to be left alone and unmonitored, money lenders will become a highly exploitative informal sector activity.
Added to this is the wantok system where a family home may also become home to five or six extended families.
The instinct to survive through any means in this overtaxed and impoverished economy far outweighs the duties and responsibilities as required of these working class citizens by their respective organisations.
Often, productivity is affected.
With 80% of the populating living in the rural areas, it means that most of the remaining 20% are exploited through high taxes to beyond their financial capacity.
No surprises then that working families in PNG can barely survive.
This abnormal scenario is driving the country towards chaos and anarchy where the principles of “survival of the fittest” are already at play.
Substantial amounts of money for development projects such as roads and social programmes to fight HIV/AIDS and others just suddenly go missing from different places without trace.
Most are “inside jobs”.
The tides of survival principles such as “survival of the fittest”, “my cut”, “you cover my back and I will cover yours”, “mi man tu yah”, “lunch money” or other similar colloquial names are sweeping across the nation at breakneck speed.
PNG needs an economic model that shifts the established tax base elsewhere as well as to redirect and slow down this “tide of survival principles” to safer ground if the country is to have any chance of achieving Vision 2050.
This model would effectively absorb the pressure on internal revenue from the few and shift the tax base to other sustainable sources so that working citizens can manage lower inflation and increase savings.
Current economic model
and trend in governance
PNG adapted the pre-independence macro-economic policies and has been generating much of its internal revenue through taxation and royalties from the major commodity industries.
The success of the adapted economic policies during the period before and after independence, compared to now can only be appreciated when a number of indicators such as population growth, rural-urban migration, national GDP, inflation and CPI, and hosts of others are factored in.
I am not an economist but by applying some reasoning and common sense, I would say the model we have adopted has limitations.
Firstly, little or nothing is coming from the 80% rural population who own about 97% of the land.
Only about 20% of the population are effectively contributing to keep the model “working”.
Similar models in other countries would be performing differently.
If the government projects the annual budget at a certain range of financial figures for an effective implementation of its development agenda, then obviously these forecasted figures would have to be generated internally through taxation and royalties.
Some of these decisions are made simply to please voters, which puts more pressure on efforts to raise revenue to meet such commitments.
Of course, this will be at the expense of the working class citizens, the 20%.
The rest just tag along.
When the government projects bigger development goals or decides to take on another loan from an external financial institution, the 20% will have to dig even deeper into their pockets to help the government balance the books.
For these families, the future would remain bleak and some of their basic rights, including a daily balanced diet and access to information through newspapers become luxury goods.
The government needs to expand its tax base while at the same time, maintain financial projects and development goals.
Hypothetically, if the 20% working class citizens are doubled to 40% and the numbers of companies operating in the country are also doubled during a five-year period, then the internal revenue during this period would be significant.
The way to expand the revenue base, creating opportunities and the vision and strategy to forge the nation forward is through science and technology.
Mining, agriculture, fisheries and forestry all have elements of science and technology as an integral part of these industries.
However, when we look at the number of science students graduating from the country’s universities, it betrays the low emphasis given.
Furthermore, most of these graduates end up as teachers, rendering the knowledge that they had gained, useless.
Much of PNG’s governance and policy debates are centred on the politics, economics and legalities of issues.
The media has totally ignored the importance of science and technology in the developmental aspirations of PNG.
The Divine Word University, being a leading journalism training institution in PNG, hosted a National Science and Technology Conference but sadly, failed to generate sufficient media coverage.
PNG has a mammoth task at hand to
achieve the UN-sanctioned Millennium Development Goals (MDG) which also
feature prominently in Vision 2050.
We must turn to science and technology to help us achieve the short, medium and long-term goals.
Obviously, a continuous and substantial source of revenue will be required to push the development agenda to achieving Vision 2050.
Increased rural participation through science and technology-based research and development will make the rural bulk more productive, which will in turn increase revenue for the government.
Our development strategies in the last 30 years were based on an social, legal and economic framework without any input from science and technology.
This is in sharp contrast with model economies like Malaysia which has also invested heavily in science and technology in recent years and has enjoyed the fruits of its planning.
The National Science and Technology Council, set up by the Office of Higher Education, Research, Science and Technology, should facilitate the formulation of a “National Science and Technology Policy” which will form the working document in the development of a national development strategy to achieve Vision 2050.
We also need for the government , businesses and academics to work together to share and use data.
In the interim, we must also identify measures that can be implemented immediately.
At the end of this intervention strategy, the following may be achieved:
*  A wider and diversified tax structure which would include a reduction in personal and corporate taxes;
* Increased rural participation and productivity that would also lead to lower urban migration;
* Increased science and technology-based research and development, pilot studies and technology transfer; and
*  Improved economic output and social indicators, reduction in HIV/AIDS statistics and others.
*Stewart Wossa has a masters in science and teaches chemistry at the University of Goroka. He is currently on research leave at the Australian National University.