Papua New Guinea businesses were taken off guard last week following Government’s announcement on the 10% removal of Good and Services Tax on selected basic goods in the country by April.
PNG Manufacturer Council CEO Chey Scovell bluntly told the Post-Courier that this was a rushed decision as they have not seen any details on this new reduction and they were caught by surprise.
Scovell said there is a universal consensus that taxes are too high, but rather than reducing GST, they should have reduced tax rates for workers. “A six-month moratorium on salary and wages tax would provide a huge boost in disposable incomes and consumer spending (if the equivalent tax was paid on to the worker),” he said. The PNG Chamber of Commerce and Industry also told the Post-Courier that a lot of questions on how this will be administered remain unanswered.
PNGCCI president Ian Tarutia said the practicalities of implementing this decision at the retail and merchant level is unclear. Tarutia asked how will customers know if they are not paying GST as approved by government, and how the State or IRC will enforce compliance to ensure retailers will not charge GST on these specific items.
“A fairer and less complicated means of assisting our people to get by at this time, while generating revenue for the State is to lower salary and wages tax and increase GST… This way our people have more in the pocket to spend and everyone contributes fairly to the tax revenue envelope,” he said.
“For example, a large supermarket would need to rewrite its software programmes to cater for the different categories of GST to be charged on different items. Also what happens to stock that was purchased at the old rate of 10%?
“Will it need to be marked down to the new rate? “How does an SME running a small trade store in the village work out what are the GST charges on the different items being sold,” says Port Moresby Chamber of Commerce and Industry President Rio Fiocco.
This call was also supported by the PNG Independent Consumer and Competition Commission Commissioner Paulus Ain. Ain said while he fully supports the government’s decision, it will be very difficult to implement, enforce and ensure that there is compliance.
Meanwhile, Puma Energy Country Manager Hulala Tokome says the reduction of GST will be a welcome relief to all customers as well as the general public. “Fuel in any business is a significant cost component so when fuel prices increase based on global oil prices, businesses struggle to absorb the added costs,” he said.
“This leads many companies to compensate for rising costs by ultimately passing on costs to consumers via higher prices for their goods and services.
“The reduction in GST will have little benefit to the industry, however, a huge benefit to consumers. Whatever we charge as GST, gets passed onto the Government through GST remittances.
“Another avenue open to the Government to drive economic activity and support communities would be to reduce excise on Petrol from a high 62 toea per litre to a comparable rate equivalent to diesel at 23tpl, this would also have a much greater impact on the lives on the masses of our rural population,” he said.