Navigating the Tax Landscape: A Guide to Understanding Papua New Guinea’s Tax System for Australians

PNG tax system – an Australian perspective

This guide aims to provide Australians with an in-depth understanding of the tax system in Papua New Guinea (PNG). As neighbouring nations with growing economic ties, it is crucial for Australians engaging in trade, investment, or other activities in PNG to comprehend the intricacies of its tax regime. This guide delves into the various facets of the PNG tax system, including types of taxes, tax rates, administration, recent developments, and their implications for Australian stakeholders. By shedding light on PNG’s tax framework, this guide seeks to foster greater collaboration and facilitate informed decision-making among Australian businesses and individuals operating in PNG.

A stable and developed PNG tax system helps Australians invest

Situated in the Asia-Pacific region, Papua New Guinea (PNG) presents a myriad of opportunities for Australian businesses and investors. Navigating the tax landscape in PNG is not complex with a thorough understanding of its tax system. This guide serves as a general roadmap for Australians seeking to comprehend the nuances of taxation in PNG, thereby enabling them to navigate the tax environment more effectively and contribute to the sustainable growth of both nations.

Types of Taxes in PNG

The PNG tax system encompasses a diverse array of taxes levied by the government to fund public expenditures and promote economic development. Key taxes include:

  • Income Tax: PNG imposes income tax on individuals and companies based on their assessable income. Just like in Australia, the tax rates are progressive for individuals and flat for companies, with various deductions and allowances available.
  • Goods and Services Tax (GST): Similar to Australia’s GST, PNG imposes a value-added tax on the supply of goods and services. The standard rate of GST is 10%, with exemptions and zero-rated supplies for certain items.
  • Customs Duties: PNG levies customs duties on imported goods, serving as a significant source of government revenue and providing protection for domestic industries.
  • Excise Duties: Excise duties are imposed on specific goods such as tobacco, alcohol, and petroleum products to discourage consumption and generate revenue for the government.
  • Property Tax: PNG imposes property tax on the value of land and buildings owned by individuals or companies, contributing to local government revenue.

3. Tax Administration: The Internal Revenue Commission (IRC) is the primary authority responsible for administering and collecting taxes in PNG. It has similar powers to the Australian Taxation Office. The IRC does a good job of ensuring tax compliance, assessing tax liabilities, and enforcing tax laws and regulations. Taxpayers are required to register with the IRC, file tax returns, and remit taxes promptly to avoid penalties and interest charges. The PNG tax administration system is continually evolving and improving to enhance efficiency, transparency, and taxpayer compliance.

4. Recent Developments: PNG has committed to continuous tax reforms aimed at modernising its tax system and bolstering revenue collection. These initiatives include:

  • Modernising tax administration through the implementation of electronic filing and payment systems, enhancing taxpayer services and conducting outreach programs to promote tax compliance.
  • Reviewing and updating tax legislation to address loopholes, improve compliance, and align with international best practices.
  • Strengthening international tax cooperation and compliance to combat tax evasion, money laundering, and other financial crimes.
  • Introducing tax incentives to stimulate investment and economic growth, including tax holidays, accelerated depreciation, and preferential tax rates for priority sectors.

Understanding the PNG tax system

Understanding the tax system in Papua New Guinea is paramount for Australians engaging in business, investment, or other activities in the country. By familiarising themselves with PNG’s tax laws, regulations, and administration, Australians can navigate the tax environment more effectively and contribute to the socio-economic development of both nations. This guide offers a comprehensive overview of the PNG tax system, covering its key components, administration, recent developments, and implications for Australian stakeholders. It serves as a valuable resource for fostering greater collaboration and facilitating informed decision-making in the realm of taxation between Australia and Papua New Guinea.

Key aspects of the Papua New Guinea Goodes and Service Tax

Taxable Supplies: The GST applies to a wide range of goods and services supplied in Papua New Guinea, including but not limited to, sales of goods, provision of services, imports, and certain intangible goods.
Taxable Value: The GST is calculated based on the value added at each stage of production or distribution. This means that businesses pay GST on the value they add to goods or services before passing them on to consumers. The taxable value includes the sale price of the goods or services, less any GST already paid on inputs.
GST Rate: The standard rate of GST in Papua New Guinea is 10%, which is applied to the taxable value of goods and services. However, certain items may be subject to exemptions or zero-rated, meaning they are either not subject to GST or taxed at a rate of 0%.
Registration and Compliance: Businesses with annual turnover above a certain threshold are required to register for GST with the Internal Revenue Commission (IRC) in Papua New Guinea. Registered businesses must charge GST on taxable supplies, issue tax invoices to customers, and remit the collected GST to the IRC within the specified timeframes.
Input Tax Credits: Registered businesses can claim input tax credits for the GST paid on their business inputs, such as purchases of goods and services used in the course of business activities. Input tax credits reduce the amount of GST payable to the IRC, thereby avoiding double taxation and ensuring that GST is only paid on the value added at each stage of production or distribution.
Exemptions and Zero-Rating: Certain goods and services may be exempt from GST or zero-rated, meaning they are not subject to GST or taxed at a rate of 0%. Examples of zero-rated supplies in Papua New Guinea may include exports, certain basic food items, medical supplies, and educational services.

Professor Brett Davies provides pro-bono support to PNG and tax advice and is therefore unable to take instructions from Australians in this area of tax law.