Changes to taxes disruptive for businesses in Papua New Guinea

News that matter in Papua New Guinea

Changes to taxes disruptive for businesses in Papua New Guinea

PORT MORESBY: The implementation of the six-month removal of Goods and Services Tax (GST) for selected items can have implications for importers, wholesalers and retailers, PricewaterhouseCoopers (PwC) said in its report.

And the passing of the dominant industry player levy (Super Tax) in Parliament on Wednesday will have a direct impact of additional tax burden on investors in the (affected) sectors, PwC added.

PwC is the world’s largest professional services organization with 155,000 professionals in 150 countries, providing clients with services to solve complex business problems.

The National published details of the PwC report that was released yesterday (March 24, 2022):

Disruptive

March 25, 2022The NationalMain Stories

THE implementation of the six-month removal of Goods and Services Tax (GST) for selected items can have implications for importers, wholesalers and retailers, PricewaterhouseCoopers (PwC) said in its report.
And the passing of the dominant industry player levy (Super Tax) in Parliament on Wednesday will have a direct impact of additional tax burden on investors in the (affected) sectors, PwC added.
Treasurer Ian Ling-Stuckey had proposed to remove the 10 per cent GST for six months on selected basic items vital for household goods.
The removal also covered items that included fuel products (petrol diesel, kerosene and zoom).
PwC’s market report released yesterday stated: “Given the operation of GST through a supply chain, there could be a number of different implications for importers, wholesalers and retailers at the time of implementation of the proposed changes.
“Ling-Stuckey’s speech listed a range of items from all fuels, feminine hygiene products, rice, cooking oils, canned fish and other grocery staples.
“The reduction will be in place for a period not exceeding six months and was announced as being put in place through legislation when Parliament reconvenes in April.
“Although not specified, the reduction would be expected to be achieved through imposing GST at 0 per cent on the relevant items.”
Meanwhile, the PwC market update stated that the introduction of the dominant industry player levy in Parliament’s November sitting ignited significant push back from a range of stakeholders across the banking and telecommunication sectors that were the target of the levy.
“As originally introduced, the levy was a fixed fee levy payable by taxpayers that hold more than 40 per cent market share in either the banking or telecommunications sectors,” PwC report said.
“The market share is to be determined through data from market regulators (National Information and Communications Technology Authority and Bank of Papua New Guinea).
“The annual levy was set at K95 million for telecommunications and K190 million for the banking sector, being collected in three installments through the year.
“Given the current market distribution in these sectors, these levies targeted a single participant from each sector.
“The levy drew criticism for its design, as well as for the direct impact the additional tax burden would have on investors in the sectors.”
PwC pointed out that the Treasurer tabled a bill with amendments to the levy was passed, further distinguishing the treatment of the two sectors.
PwC added: “For the banking sector, the value of the levy remains unchanged, but is now payable in a single installment on Sept 30 each year. However, for the telecommunication sector, the levy has been altered to a one-off amount of K350 million payable on March 2022.
“Given the imminent sale of the current dominant player in the telecommunications market, the levy has essentially been recast as an exit tax. However, it continues to be imposed on the PNG operating entity and not directly on a shareholder.
“While the levy remains an impost on only two taxpayers in the country, the legislative mechanisms applied to create these additional taxation obligations remain at odds with the aims of tax reforms over recent years and does not appear to meet taxation best practice in terms of equity of application, and a key goal of tax being non-distortive in its application.”
PwC is the world’s largest professional services organisation with 155,000 professionals in 150 countries, providing clients with services to solve complex business problems.

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