Infrastructure tax credit scheme debated

The infrastructure tax credit scheme should not be repealed.

This was the argument put forward by participants of a tax seminar organised by the National Research Institute.

The main point was that while the systems are there, governance on the part of the government is weak, especially when it comes to the management of funds.

The title of the seminar presentation was ‘Papua New Guinea’s extractive resource sector: Towards a policy of leaner tax incentives’.

The lead presenter was Dr Diane Kraal from the Monash University in Melbourne. Her method of research included comparative analysis from countries like Australia, Malaysia and Indonesia.

One of the main issues she faced when carrying out research in PNG was the lack of availability of data.

“Essentially if tax incentives were cut back, then there would be more funds for domestic business and for the wider community,” said Dr Kraal.

There were seven recommendations from the finding:

  1. The infrastructure tax credit scheme should be repealed
  2. The fiscal regime for the extractive sector should be incorporated in general legislation
  3. Sector specific depreciation allowances and accelerated depreciation should be eliminated to simplify the regime
  4. No tax holidays to the extractive industry in the future
  5. No import duty exemptions to the extractive industry in the future
  6. Tax expenditure statements should be compiled from regulators and tax payer information and be made publicly available
  7. Tax expenditure statements to be prepared outside of the National Budget

The infrastructure tax credit scheme should be repealed recommendation was the most debated one.

The presenter argued that the mining operators should not be involved in social projects because that was the responsibility of the government.

“So what I’m suggesting is a difficult model, which happens in other OECD (Organisation for Economic Co-operation and Development) countries, so you collect the tax and you provide a grant, maybe to the local province, to actually put the social infrastructure in place.

“It really has nothing to do with the primary mandate of the extractive industry to be putting those facilities in place, it’s the government’s responsibility,” said Dr Kraal.

Those against cited PNG’s weak governance record in terms of managing project funds.

“What do we see in PNG? Government is failing to deliver services to our communities to our rural areas, being a tax officer our objectives is to collect tax, we’d like to maximise revenue by giving away incentives. “We are giving away revenue that the Internal Revenue Commission is supposed to collect,” said IRC’s Director Resource Policy and advice Katty Masy.

In conclusion, Dr Kraal said she would relook the infrastructure tax credit scheme issue.

The National Research Institute, through Dr Francis Odhuno, said they would work on a separate paper concentrating on the issue of infrastructure tax credit scheme.

Meredith Kuusa