No new taxes will be introduced in 2016 despite the global economic storm, says Prime Minister Peter O’Neill.
O’Neill gave this assurance at the PNG Advantage investment summit in Brisbane, in August this year.
“We are in a period of growth and economic expansion that has never been seen before in our country.
“At the same time, our GDP growth, and other areas such government revenue, have been impacted by global factors beyond our control.
“The downturn in the commodity prices is affecting Papua New Guinea and the 2015 Budget - just like other countries in the world.
“The Government will be responsible in adjusting economic projections, including the 2015 Budget,’’ he said.
“We will continue to monitor developments in commodity prices, and undertake adjustments in a responsible manner.
“Our Government is determined to ensure that external factors do not impact on our core policy areas - of free education, the provision of universal healthcare, improving law and order, and investing in key economic infrastructure.
“Added to this, let me say this here today, there is no intention by this government to increase any new taxes in Papua New Guinea.’’
However, in a statement, the tax review committee notes that government revenue is critical for service funding.
“Government revenue is critical to funding essential services and infrastructure for Papua New Guineans, to share the benefits of prosperity across families, communities and regions and to lay the foundation for future growth” the statement says
Efficient funding of service delivery mechanisms in the country is anticipated to provide access to markets and other income earning opportunities, lowering the pressure on the high cost of living in PNG.
The Department of Treasury, however, believes that the country’s impressive economic growth has not been translating into optimal fiscal and revenue yields.
With the prospect of an extended period of strong economic growth, tax revenue is expected to pick up from K9.7 billion in 2014 to K10.5 billion in 2015 growing to K14.4 billion by 2018; non-tax revenue is projected to reach K1.2 billion by 2018.
Meanwhile, Finance Minister James Marape has also reiterated that there will be no increase in ‘Goods and Services Tax’.
But he said an increase in the tax threshold was a possibility.
“I have observed some commentaries on the recommendations from Tax Review Committee (TRC) on the call to increase GST to 15 percent.
“May I give comfort to all PNG tax payers that similar proposals were put last year during budget preparations and our PM (prime minister) rejected it outright saying that under his watch as PM, our systematic inefficiencies will not be addressed by passing tax burden to our people.”
“Take it from me it will not happen so please do not be gullible to all words (written) in the press, some are false or in this instances it’s just a recommendation. This increase will not happen.”
Currently GST is included at the point of sale of all goods sold and services offered by business houses in the country.
However, the Tax Review Committee headed by Sir Nagora Bogan have recommended that the Goods and Services Tax (GST) will be increased from 10% to 15%.
Sir Nagora Bogan said this will improve the tax mix and help to ensure that the informal economy pays a fairer share of tax.
The tax review has also recommended the government to repeal the current zero-rating of supplies to resource companies, aid programs and charitable organisations and replace it with a standard treatment whereby relevant supplies for those sectors are zero rated.
The purpose of the recommendations was to protect the integrity of the GST system and to simplify the administration arrangement.
Meantime, the nation’s leading think tank, National Research Institute (NRI) has recommended that the proposed Goods and Services Tax (GST) should not be increased.
The institution has released a report on the proposed Goods and Services Tax and Corporate and Personal Income Tax changes in response to recent media reports and discussions on social media.
This follows a report that the Tax Review Committee intends to propose to the Government to:
increase the personal income tax-free threshold from K10,000 to K15,000;
reduce resident company tax rate from 30% to 25%; and
Increase the Goods and Services Tax (GST) rate from 10% to 15%.
Senior Research Fellow, Dr Francis Odhuno said a higher rate is not needed given that the Government believes that the economic outlook is positive despite the fall in commodity prices, which is considered a temporary shock to the country’s economy.