Increased accountability in TCS needed: Report

Increased transparency and accountability is needed in the approval, administration and offsetting of tax credit schemes (TCS).

This was one of the recommendations of the PNG Extractive Industry Transparency Initiative (EITI) 2016 Report.

The report states that previous PNG EITI reports have found discrepancies and inconsistencies in the reporting of the value of tax forgone as a result of funds spent on infrastructure development.

The report states that reporting templates for the 2016 report were updated in an attempt to clarify the value of funds spent and forgone.

However, there was a lack of response from the Department of National Planning and Monitoring, resulting in the non-verification of the value of approved Infrastructure Tax Credit (ITC) project spending by reporting entities.

The report further states that there were also significant discrepancies between the ITC offset reported by companies and the Internal Revenue Commission that in some cases, could not be clarified due to differences in methodologies for reporting the value of the tax credit.

“In response to the recommendations of the Taxation Review Report, the PNG government has announced that the scheme will not be abolished but will be reviewed to improve administration,” states the report.

“The government has also noted that the process needs to be more transparent regarding guidelines and criteria involved in the approval process. And that the ITC expenditure should be included in the annual national budget books and DNPM should be able to show this information on its website.”

The 2016 PNG EITI Report has thus recommended increased transparency and accountability regarding the approval process by DNPM, funds administered on projects by companies and resulting tax offset by the IRC.

It also calls to evaluate the method currently being used to reconcile this information for EITI purposes through cash basis reporting.

Author: 
Cedric Patjole