BUSI­NESS PRE­PARES FOR PA­PUA NEW GUINEA TAX RE­VIEW

Busi­ness in Pa­pua New Guinea is now fo­cus­ing on the coun­try’s tax­a­tion re­view—one that could have ma­jor im­pli­ca­tions for busi­ness, in­clud­ing the coun­try’s re­sources sec­tor.

Business Advantage Papua New Guinea - - Contents -

With the PNG Gov­ern­ment plan­ning for ad­di­tional rev­enue of K585 mil­lion (US$229 mil­lion) to be col­lected by the PNG In­ter­nal Rev­enue Com­mis­sion (IRC) this year, the pres­sure is on to im­prove the way the coun­try is taxed.

PNG’S tax­a­tion re­view is look­ing at com­pet­i­tive­ness and ef­fi­ciency in PNG’S cur­rent tax sys­tem and non-tax rev­enues, and iden­tify op­por­tu­ni­ties for greater fair­ness and sim­plic­ity. It will also look at ways of im­prov­ing com­pli­ance and will out­line pos­si­ble changes to the coun­try’s tax mix.

The re­view, un­der­taken by a com­mit­tee of dis­tin­guished Pa­pua New Guineans and headed by Chair­man Sir Nagora Bo­gan, is be­ing sup­ported by the Depart­ment of Trea­sury, PNG Cus­toms, the IRC and the IFC.

It will in­cor­po­rate the long-awaited re­view of the tax­a­tion regime for the min­ing and petroleum in­dus­try, PNG’S most lu­cra­tive in­dus­try sec­tor.

Busi­ness bod­ies such as the PNG Cham­ber of Mines and Petroleum, the Man­u­fac­tur­ers Coun­cil of PNG and the PNG Cham­ber of Com­merce and In­dus­try have ad­vised Busi­ness Ad­van­tage they are cur­rently plan­ning sub­mis­sions to the re­view.

While he says it’s too early to an­tic­i­pate the re­view’s rec­om­men­da­tions, Bouke Wa­ge­naar, Part­ner Tax­a­tion Ser­vices at Deloitte PNG, tells Busi­ness Ad­van­tage that the Gov­ern­ment will be look­ing to col­lect more tax from busi­ness to fund tax breaks for the masses.

Sen­si­ble rules

In­stead of new taxes, an im­proved fo­cus on the ef­fi­cient ap­pli­ca­tion of ex­ist­ing tax rules would be de­sir­able.

‘This isn’t a leg­isla­tive is­sue. PNG has a lot of sen­si­ble rules but they’re not nec­es­sar­ily ap­plied ef­fec­tively. If they can ramp up the IRC, make it more ef­fi­cient and make sure peo­ple who should be reg­is­tered to pay tax are reg­is­tered, that would make a big dif­fer­ence.’

Wa­ge­naar says the IRC has al­ready taken some steps to im­prove mat­ters, through the in­tro­duc­tion of new tech­nol­ogy and an in­ter­nal re­or­gan­i­sa­tion, but there is a way to go be­fore the tax sys­tem benefits fully from tech­nol­ogy.

‘At present, the new sys­tem only cov­ers with­hold­ing tax, and only the largest tax pay­ers are on it,’ he says.

Tech­nol­ogy can have a down­side too, how­ever: there are con­cerns that au­to­mated work pro­cesses at the IRC could lead to penal­ties be­ing ap­plied much more of­ten than is the case to­day.

Ex­pert sub­mis­sions

Deloitte and KPMG are just two ac­count­ing firms cur­rently con­sult­ing with clients and con­sid­er­ing mak­ing their own ex­pert sub­mis­sions to the re­view, while Price­wa­ter­house­coop­ers has al­ready lodged a num­ber of sub­mis­sions, ac­cord­ing to Part­ner David Caradus.

Wa­ge­naar’s ad­vice to busi­ness peo­ple is to pro­vide feed­back to the re­view on the ex­pe­ri­ence of com­ply­ing with the cur­rent tax sys­tem:

‘As a com­mu­nity, there’s an op­por­tu­nity to let gov­ern­ment know our per­cep­tion of how things work and what’s im­por­tant to us. We can’t just ex­pect them to know. We need to make sure busi­ness is taken into ac­count.’

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