Commission on major changes to tax legislation

The Internal Revenue Commission will be administering two major changes to tax legislation as part of the 2019 budget.

IRC made this known following the announcement of a successful 2018 tax collection target.

The first major change that taxpayers should expect is the widening of the tax-free threshold and first-tier threshold for marginal income tax for individuals.

The Internal Revenue Commission has clarified that the legislative change reduces income tax burden on every individual in Papua New Guinea.

2019

Tax rate

1– 12,500

0

12,501 – 20,000

22

20,001 – 33,000

30

33,001 – 70,000

35

70,001 – 250,000

40

250,001+

42

 

“Every salary and wage earner, the first K12,500, you pay no tax on it,” clarified the Commissioner of Tax, Dr Alois Daton. “There’s no tax on the K12,500, even if you get a K100,000 a year. There is no tax on your first K12,500.

“It’s not only for those people on the brackets of 22 percent and 30 percent. It’s every employee in the country. So you get a break of K2,500 from your taxable income.

“This is more like tax saving for everybody. People have been complaining about, when they see this they say ‘the tax free threshold basically becomes a burden to the people because now we’re paying more tax’, but that’s not the case. There is no increase in the salary and wages tax. It’s just the increase in the tax free threshold.”

From July 2012 – 2018, the minimum tax threshold was K10,000. For this year, the tax free threshold has been moved up to K12,500. This means that those who earn K480 a fortnight, or less, will take home their full pay. That amount will not be taxed.

The legislative change also affects the 22 and 30 percent tax bands. In the previous years, those who earned K10,001 to K18,000 were in the 22 percent tax band. In the recent changes, the amount has been increased so those who earn K12,501 to K20,000 a year, are in the 22 percent tax band when previously they were in the 30 percent tax band.

2010 – June 2012

July 2012 - 2018

2019

Tax rate

1 – 7,000

1 – 10,000

1– 12,500

0

7,001 – 18,000

10,001 – 18,000

12,501 – 20,000

22

18,001 – 33,000

18,001 – 33,000

20,001 – 33,000

30

33,001 – 70,000

33,001 – 70,000

33,001 – 70,000

35

70,001 – 250,000

70,001 – 250,000

70,001 – 250,000

40

250,001+

250,001+

250,001+

42

IRC announced that the second change relates to supplies to resource companies.

Effective January 1st, supplies will no longer be zero-rated but will be subject to the full 10 percent goods and services tax rate, except for supplies made to companies that have signed a fiscal stability clause with the government.

Author: 
Carmella Gware