Closing markets to competition and providing subsidies is not a long – term solution to encouraging locally owned businesses in Papua New Guinea (PNG). Similarly, tax holidays and other concessions are not an effective or efficient means of attracting foreign investment.
Academics from PNG’s think- tank, National Research Institute (NRI), Dr Thomas Webster, and Francis Oduno argue that giving tax havens to foreign companies but imposing hefty taxes to locally own small to medium term enterprise (SME) is a big sin to the economy.
There is a need to bring in more investors to develop the country. But the question the academics pose is;
“What happens after the investors finish their tax holidays and decides to pack up and live PNG?”
As a result, the academics are calling for a broader tax base economy. Dr Webster, the director of NRI further articulates this as;
“The government needs to creates a broader tax base economy. The government can do this by ensuring a more efficient taxation to the personal income and corporate taxes imposed by the government on the PNG owned SMEs.
“Our people need to be taxed less so they can save some money and start their own business and this will help grow the economy and as I said, create a more broad based and sustained tax base economy” Dr Webster argues.
As it is now, PNG’s economy is driven by the extractive industries including mining, petroleum and oil as PNG Loop reported earlier.
Dr Oduno, research fellow, gives a counter argument quoting Prime Minister Peter O’Neill. “The Prime Minister earlier on announced a non-taxable income of K20, 000” Dr Oduno states.
He however reminds all that government also needs tax revenue run the country.
Dr Webster also agrees that the government needs the tax revenue for delivery of the basic goods and services to the people but firms his earlier argument that the personal and corporate taxes imposed to Papua New Guineans and PNG owned SMEs should be reduced.
That brings up the concern on collection mechanism employed by the Internal Revenue Commission (IRC) and customers.
The two academics pointed out some inefficiencies in the tax collection mechanism employed by IRC. These they argue is allowing thousand more companies to exempt tax illegally.
“There is need to train IRC and customs in the areas of tax collection and administrations as well as audits” the academics note.