Tax relief ‘hard to administer’


THE Government’s K350 million relief package to lift tax on fuel products and selected store goods will be difficult to implement, says Institute of National Affairs (Ina) executive director Paul Barker.
“The Government has introduced a temporary reduction of GST (goods and services tax) on some products, but this is very challenging to apply in practice for both businesses and the Tax Office,” Barker told The National.
The K350 million package covers the following:

  • LIFTING GST taxes entirely on targeted key household items – flour, rice, noodles, canned fish, canned meat, women’s sanitary products, diapers, biscuits, cooking oil — (K100 million);
  • LIFTING GST taxes entirely from petrol, diesel, zoom and kerosene for retail consumers (K50 million);
  • LIFTING fuel excise taxes entirely from petrol, diesel, zoom and kerosene for retail consumers (K150 million);
  • BRINGING forward the reduction in the fuel import tariff excise (K20 million); and,
  • SUBSIDISING PNG Power to help deal with increased fuel costs (K30 million).

Barker said the advantage of the GST system in PNG was its relative simplicity and consistency at a 10 per cent standard rate across all products.
“Temporarily adjusting some rates for some products that may be midway through their sequence of sales transactions would be hard to administer,” he said.
“It would be easier to apply a temporary reduction in fuel excises, and because fuel is invariably used through the value chain for most products, both for transport of people and goods.
“This may be less targeted than the GST measure, but it would have a wider impact on restraining inflationary pressures across a spectrum of products, that are part of a wider value chain.”
Barker added that a freight subsidy on domestically produced staple crops and other vegetables, as was applied earlier during the pandemic on shipments from Lae to Port Moresby, but applicable to all shipping companies providing the service, would relieve food costs in NCD and provide some temporary encouragement for domestic producers, versus imported staples.
“Often the application of other measures to improve the supply chain is more useful, including a programme to improve access to markets, notably roads and other infrastructure and enhance competition in transports services.
“These measures can have a slower impact, however, than the quicker interventions to directly lower costs and seek to reduce the temporary price rises.”