The old saying goes ‘nothing is certain except death and taxes’ but visiting political economist Professor Mick Moore believes that tax gets a bad rap and has an important role to play in a country’s development.
Professor Moore, Chief Executive Officer of the International Centre for Tax and Development in the UK, is currently in Port Moresby for a series of government meetings and public events to discuss the obstacles and opportunities for public revenue generation in PNG.
He said that while people might not necessarily like tax its effective collection is often linked to good governance, and better public services and infrastructure.
“There is actually quite a strong connection, globally, between the ways in which countries raise tax revenue and the ways in which they are governed,” Professor Moore said.
“When countries are well governed – when disputes are resolved peacefully, elections are held regularly, the rule of law prevails, roads are in reasonable repair, citizens can rely on government for at least basic health, education and welfare services, and government is broadly trusted – then we generally find that government revenue systems are healthy.”
Professor Moore was the keynote speaker at the final Toktok Bilong Strongim Nesen discussion series event for 2019, which was themed ‘Billions from Betel Nut? Taxation, Growth and Governance.’
He was joined for the discussion by East Sepik Governor Allan Bird, Acting Internal Revenue Commissioner for Taxation Pauline Bre, KPMG Managing Partner Zanie Theron and Tanorama Executive Director (moderator) Martin Brash.
Professor Moore’s visit and the discussion series are supported through the PNG-Australia Partnership.
The event covered a range of topics, ranging from small and medium-sized enterprises through to PNG’s extractive sector, which represented 86 per cent of total export value in 2017.
Professor Moore acknowledged it is often difficult for governments to collect income from small-scale businesses and cautioned on attempts to tax rural people.
“It’s a very expensive business,” he said, “it is easy to spend most of the money connected on the salaries of the people doing the tax collection.”
“If low income farmers are going to pay any kind of direct tax, then they should be paying small amounts to their local councils.”
Taxing the big end of town brings its own set of challenges and Professor Moore said effectively taxing the mining sector is the biggest single challenge for low-income countries globally.
“Very few have got it right,” he said, “overall, mining is significantly under-taxed – even more than oil and gas extraction.”
“We could make a good start by introducing much more transparency.”
While collecting tax is never easy, Professor Moore said there are important lessons from the rest of the world that could help PNG.
This includes innovation and technology, which he sees as a “game changer for tax collection” that has the potential to save time and money for governments and ordinary people.
“Digitisation makes it easier for taxpayers to file their returns and make payments,” Professor Moore said.
“These technologies are available to even low income countries. They may even be particularly useful for countries like PNG with scattered rural populations.”
Another critical factor is for governments to pay close attention to tax system fairness – applying the rules to everyone equally and demonstrating that tax is being spent well, rather than being wasted.
“No system of revenue raising is going to be very effective if it does not consider the views and opinions of the people we are trying to tax,” Professor Moore said.
“[Governments] need to show that they are making a good effort to make the taxpaying process as easy as possible for the taxpayers.
“Equally, they need to demonstrate that they are enforcing the rules on everyone. I’m going to be very unhappy about paying my taxes if I perceive that my neighbours are managing to avoid them.”
The event was part of the Toktok Bilong Strongim Nesen discussion series that is supported by the Papua New Guinea – Australia Partnership.
Toktok Bilong Strongim Nesen provides a platform for open public engagement with local and international experts and explores themes and policy issues pertinent to Papua New Guinea and the Pacific.