PwC supports the tax review initiative implemented by the government, which is designed to take stock of Papua New Guinea’s fiscal regime to ensure, among other aims, that it supports the development goals of the country. It must also support competitiveness and efficiency, and be relevant to PNG’s situation now and into the future. Above all, it must be fair.
PNG tax laws and systems have evolved over time, with very little change over several decades, yet social, demographic, economic and other circumstances continue to prevent the country from developing at an accelerated pace. It is thus very timely that we challenge the relevance of our fiscal regime to be responsive to these changes. It is healthy to reflect on how well the government is positioned to meet the demands of the future and the tax review will offer new insights on how to deal with these changes.
While some sectors may be apprehensive about the outcomes and impact, this should be seen as a great opportunity for taxpayers, including businesses, to shape the future they want for business in PNG.
PwC is taking the lead to ensure it is at the forefront of consultations with the Tax Review Committee (TRC), industry participants and other stakeholders. Through this engagement we can ensure the debate leads to positive opportunities for reforms that are conducive to continue investment and good business, but also to the betterment of PNG society as a whole.
While there are gaps in the tax legislation that should be addressed, on the whole the PNG tax system does not need to be significantly overhauled, and I think this is quickly becoming the TRC’s perspective.
The TRC has advised that it will publish a number of issues papers, as well as invite industry consultation on specific taxes and the impact on other sectors in the coming months. However, one area that the committee has already sought consultation on is the taxation of the mining and petroleum sector. Given the significance of this sector to PNG’s fiscal health, any review should be weighed against the contribution to the economy, the tax as well as the non-tax contributions made by sector participants, and the future ability to attract foreign direct investment to further develop this area. Given the dynamics of these factors to the overall welfare of the PNG fiscal balance, any changes proposed need to be well considered.
Another area of focus for the TRC is the review of the tax administration systems and processes, with a view to streamlining and improving collections, stopping revenue leakage and administration. If one change were to be made, then improvements in this area should be the priority. The positive impact to government revenues would be considerable from this one area of change alone, without the need to make extensive alterations to tax legislation.
Another reason for reflection is that, as PNG becomes more integrated with the global community and, more particularly, the Asia-Pacific region, the country needs to be more competitive. Our fiscal regime does have a tremendous impact on our ability to compete for skills, capital and other resources, and therefore ensuring a focus on this is important to our collective development and future success.
Getting the right balance is a significant challenge. Everyone has a view about tax, and, in this case, we have observed various sectoral views already. What is important is that any reform should involve broad consultation, be properly modelled to assess its economic efficiency if implemented, and be responsive to demographic changes. Likewise it should impact on our labour market, society and overall living standards, and our competitiveness in the region and globally.
As a final point, as technology continues to change the way businesses operate in our market, the government too should be looking at how it can leverage technology to improve how taxes are processed. For instance, as more and more transactions are conducted electronically, there is increased opportunity for broad-based taxes to be applied as a mechanism for ensuring taxes are being better captured and at an earlier stage.
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