The National,Thursday March 24th, 2016
PAPUA New Guinea is facing a difficult economic time with a growing demand on public funds, says Institute of National Affairs executive director Paul Barker.
He said despite a growing population and various major expenditure commitments, including free education and medical services, the Government had failed to prune the widely wasteful and poorly managed district grants.
Barker (pictured) warned that 2016 was leading up to the national election when MPs would be leaning hard on the district funds.
“There’s a tendency for other politicised expenditure (and revenue restraint), as well as the costs associated with preparing for and conducting the elections themselves,” Barker said.
He said the Government wanted to squeeze taxes out of businesses even though the level of business activity had dropped because of the low commodity prices, no major commercial construction activities, and reduced government expenditure in the area.
He said Government payments had bounced and foreign exchange unavailability undermines international payments for services and imports (including components for local manufacturing or transport).
“Formal businesses and households already feel heavily taxed, in relation to the public goods provided,” he said.
“But the main areas where extra taxes should be secured relate to the many unregulated businesses out there, not paying or registered for GST, or group tax, or paying minimum wages.”
He said some resource projects, including the logging companies recently highlighted as not paying company taxes, and claiming to have been operating for decades without making any profits, yet heavily invest in extensive real estate and other business activities.
Barker said there should be positive areas in 2016, including improved coffee exports, albeit at relatively low prices, and sound cocoa exports.
Barker had said in an article earlier: “Papua New Guinea needs to avoid accumulating debt through unsustainable deficits or major further borrowing, particularly for activities which are marginal to government functions, such as equity acquisition (except under the auspices of the Sovereign Wealth Fund).
“Action is being taken by Government, churches, business foundations, and development partners to address the lack of basic services. For instance, there is a new rural airstrip agency and a major school of government planned.
“But action remains sporadic and ill-coordinated, with public sector capacity, performance and accountability the weakest link.
“The Government cannot squander funds on low priority activities and one-off events, and must establish and operationalise the long-delayed Sovereign Wealth Fund, revitalise the anti-corruption and accountability effort, and focus policies on establishing favourable conditions for economically and environmentally sustainable activities, particularly in agriculture.
“It also needs to encourage young men and women to participate actively in the economy.”
The Institute of National Affairs has been vocal on addressing economic and social issues.