MCPNG's PNG National Press Club event returns

The Media Council of Papua New Guinea's signature public information and issue discussion platform, the PNG National Press Club, has made a successful return to the national media information scene.

This prestigious information discussion platform returned on Wednesday, May 24th, with the Internal Revenue Commission (IRC) Commissioner General, Sam Koim, as Guest Speaker.

Mr. Koim, who admitted that he had had zero knowledge about taxes before joining the IRC, said in the three, going on four years that he has been heading the Commission, he has learned much and was able to propose changes that have seen the Commission growing in its role as the country's tax revenue collector.

While acknowledging that the topic of taxation may not be everyone's favourite topic of discussion, Mr Koim says it is an important national conversation to be had.

"Tax, as we all know, is not always the favourite subject matter for us to talk about, but it is a necessary conversation, when we are talking about the country, the economy, our welfare and well-being.

"Taxes play a critical role in the development of our country. The taxes we collect pay for public servants salaries, policemen, IRC officers, everybody. The taxes that we collect also provide goods and services. Much-needed infrastructure around the country is built by taxpayer funds," Mr. Koim said.

'Taxpayer Funds'

The IRC Commissioner General also acknowledged that the words 'taxpayer funds' have rarely featured in the national conversations when taxpayer funds are used in tangible, visible development.

"Unfortunately, the words 'taxpayer funds' rarely feature in our conversations. Its rarely narrated. It's rarely heard, and I think it is a good thing that some awareness is beginning to happen, where we are now saying these are taxpayers funds, and we really want to kill some people.

"I have seen over the years, that we rarely attribute someone presenting an ambulance, someone giving some cash to some hauskrai, we rarely say 'it's taxpayer's funds'. So I think this is an important that we are having this conversation," he said.

Increasing natural resources revenue 

Mr. Koim told the Press Club audience that while multi-billion dollar resource companies continue to extract our country's natural resources, there is still a lot of room in this space to increase the portion of national taxation revenue collected from the resource sector.

"When the economy is growing, the tax administration, and the government, through the tax administration, must have the ability to extract a sizeable portion of that growth. Of that economic activity that is taking place, so that that portion of the wealth that is extracted through the taxation process, can then be redistributed for the benefit of us all.

"And when we talk about our resource wealth, and natural endowments that are being extracted, we also need to put in fiscal mechanisms so that we can extract a sizeable portion of that revenue through resource rents, we need to extract it, so that we can then redistribute it through the budget process for all our benefit."

Mr. Koim says the level of taxation currently being 'enjoyed' by resource companies operating in the country is something currently under very close scrutiny, with a view to amending it to ensure that more is extracted from these companies in taxes.

"I still hold that strong view, that in the resource space, our mechanisms to collect taxes, or resource rents is still very consensual and generous. We need to extract at least an adequate portion of that resource, which is depleting, and then redistribute it for our people. It is a conversation that is being had at the government level, to get more out of the extraction of our resources."

80% of total national revenue

Mr. Koim says the IRC contributes 80 percent of the total national revenue collected each year, and while the COVID-19 pandemic impacted businesses accross the country, and the world, there were also positive outcomes in the way the pandemic forced the Commission to explore and put in place more streamlined ways of conducting the business of collecting taxes.

"At the moment IRC contributes around 80 percent of total government revenue. Our SOEs are still struggling to pay dividends to the government after suffering from two years of COVID. 

"COVID has not only disrupted our way of doing business, but also compelled us to find newer ways of doing business."

Interventions to stop leakage

A lot of challenges still exist in the area of tax collection in Papua New Guinea. 

Mr. Koim said one of the biggest ongoing challenges the IRC faces is the problem of tax evasion, which affects the level of annual taxation collection.

He said the IRC has already begun introducing interventions in this space, and that of fraudulent tax refund claims being sent to IRC.

"We have identified some of the leakages, and some of the lower hanging areas where people were blatantly taking claims in to IRC. People inflating invoices or whatever, taking it in to IRC. IRC never checked it in detail, they would just process the returns, process the refunds, a lot of leakages happened.

"What we've done is we have just introduced a list of interventions in that space, and tax evasion continues to feature as one of our biggest challenges, even today."

Tax incentives, holidays and claiming losses

Tax incentives or holidays granted to development partner companies, along with resource companies claiming losses year after year has been one of the areas which has prevented the IRC from collecting what it can every year in taxes.

"The other area in this space as well, is in the leakages area, are tax incentives which continue to feature as one of the biggest leakage areas. Incentives like the tax holidays that are given to developers that come in to the country. Tax credit schemes that go unmonitored. Projects that run into millions and millions of kina, and not properly monitored," Mr. Koim explained.

Tax evasion, according to Mr. Koim, also comes in the form of fraudsters abusing genuine tax incentives for refunds of grants or projects meant to help foster research and development.

"We have had some research and development funding that allowed people to claim 150 percent in credit if you spend some money, so billions and billions of kina worth of claims on a research and development (project) was claimed to IRC, and given, but we have never seen the patents registered, and the software developed, and new products being developed in this country equivalent to the amount of billions of credit that was given." Mr. Koim said, saying that proactive interventions have helped IRC to bring leakage levels from 150 percent where it used to be, down to only 50 percent."

He said that historically, there were developer companies who had continued to declare losses for years on end, and as a result, were exempt from paying taxes.

Mr. Koim explained that the IRC has put a time limit on how long companies can claim losses, restricting this exception to only 7 years.

Performance M&E and output

As part of interventions to improve and evaluate productivity, the IRC has embarked on identifying individual staff levels of output. 

Mr. Koim says these interventions were introduced based on his experience with the operational performances of government departments and statutory authorities.

"Our mandate is to produce revenue, and productivity was one of the things we emphasized, and we are still building on it. We have installed digital tools like monitoring systems that are in stealth mode, and they are monitoring the staff performance behind the screen. And they do not have a way of finding out how its happening.

"We've also installed GPS monitoring for all the vehicles around the country, and introduced some nudges, to change the default setting of how to effectively collect one of the products that is really really working well, is government contractors."

He said government contractors would secure contracts, charge the government GST, and after receiving payments, would not remit the GST to IRC. 

An specific intervention on this, has helped.

"What we've done now, is we have embedded the GST collection mechanism in the government IFMS system, and effectively collect it before payments are made to contractors. 

"There were some sentiments that this would not work. And we were adamant on introducing it, so we went ahead with it, and last year it produced around K285 million. That's on that product alone. That was over eight months, because the first four months were taken off by the technical glitch or the cyber attack on the IFMS system. So eight months it produced around K285million, with a corresponding refund of 1.8 million alone. So 283.2 million was free cash, that has always been stolen, by government contractors."

Simplifying tax laws

Mr. Koim told Press Club participants that one of the most recent interventions was to make it easier for Small to Medium Enterprise or SMEs to understand taxation laws in efforts to strengthen tax compliance.

"The tax laws are very complicated. Sometimes, you don't need to be a tax specialist to venture into business, but our tax laws are very complicated, so what we've done is we have done some simplification, and we've introduced a Small Business Tax Regime, so if you are a sole trader, and your turnover is below K60,000, you pay only K150 and fill out one form only. These are the types of interventions that we have introduced.

"The future we are looking at, is we have a vision, a strategic vision, to become a robust model of tax administration," Mr. Koim said.

The IRC Commissioner General says he is proud of what IRC has done to date. 

He also admitted that some interventions would take some time before their results become more apparent.

"One of the things that I see that happens, is that people just go into the organization, and that's like a vehicle, you just start driving for long distances. Without appreciating whether the vehicle has the agility, and the capacity to take you for the long distances. So what we've done now, is we have spent some time building the organization so that it can stand on its own, and also that it is an organizations that can collect increased revenue demands from the government."

The progress of the IRC, according to Mr. Koim, rests in the numbers, which he says, do not lie.

"In hard years, IRC has rarely collected above K8 billion. In 2020, under COVID, we collected K8.2 billion gross.  In 2021, still under COVID, we collected K9.6 billion, and in 2022, one year out of COVID, we collected K15.2 billion.

"So there is a progressive increase in the way we have collected, and there is more room to improve. So I guess some of the formulas and interventions we have introduced are working, and it is really encouraging for myself and the staff to continue to do what we do."

What the future holds

Commissioner General Koim believes the future of tax will be increasingly robust, with planned interventions in collaboration with other global tax authorities, to ensure that the environment currently seeing companies moving their assets to countries considered 'taxation havens' changes to stop the practice.

There is also a growing interest in ensuring that businesses based outside of Papua New Guinea, but making money from PNG citizens and residents, remit some of their revenue in taxes to PNG.

"We are also looking at taxation in the digital space. Everyone is saying Facebook. Everyone is saying Google. We are accessing all of these services. These companies are making money out of this country. Amazon.com, Alibaba. They are making money out of PNG, but we are not collecting any taxes. We don't have the capacity to do it," Koim says, while adding that discussions have already commenced with the Australian Tax Office (ATO) with an intention to have tax regulations covering this space.

Tax Expenditure practices must change

In concluding this remarks on the work of the IRC, Mr. Koim said that when discussing tax issues, there must also be a discussion about the way taxes are spent.

"Tax expenditure is a conversation that must happen, and it also goes towards tax morale. When taxpayers see that their taxes are at work, then they are happy to pay tax. That is where you people come in, the media comes in, and we all need to come in. The citizens need to come in to hold those of us who are spending taxpayer money, accountable. 

"We cannot continue to build one bridge, at the cost of two, all the time. We cannot continue to do that. Any kina that is saved, is a kina earned. If we make sure that the quality of the expenditure is controlled, and improved, we will gain a lot out of the little that we have.

"Before joining IRC, I used to think that it was a money problem. Now we are tightening things up, and collecting the money, and there is money to be collected. Now the conversation should be about improving the quality of expenditure.

Call out bad practice

Mr. Koim encouraged media personnel to spotlight instances of poor public expenditure and the irresponsible use or abuse of public assets and property, and call them out for what they are - the mismanagement of taxpayer's funds.

"That is something where you, media, as the fourth arm of government, can come in and shed some light. I want to see more conversations. 

"If you see a public servant driving a vehicle and plunging it into a hole, call it out as taxpayers money at work. That's the kind of conversation we should be having," Mr. Koim said.

Mr. Koim was the first Guest Speaker in what has been the resurrection of the PNG National Press Club event, a public information and discussion platform facilitated by the Media Council of Papua New Guinea, the National Broadcasting Corporation as the production partner, and the Lamana Hotel as the venue provider.

ENDS....//