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.
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.
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.
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.’