The corporate tax regime in Papua New Guinea

Papua New Guinea (PNG) has witnessed outstanding economic growth over the past 10 years, accounting for 2.3 percent of the South Pacific region’s gross domestic product (GDP). However, according to the Department of Treasury, the country’s impressive economic growth has not been translating into optimal fiscal and revenue yields. The threat to the revenue is projected to reach K1.2 billion by 2018. Consequently, in an effort to stem this potential loss of revenue and improve tax collection and administration, an immediate analysis of the tax regime is critical.
The aim of this paper is to investigate the corporate income tax regime in PNG and make recommendations for tax reform with the view to improving future revenue collections. The paper is organised as follows. Following this introduction, Section 2 briefly outlines the main features of the corporate tax regime in PNG. Section 3 identifies concerns with the current corporate tax regime, including revenue trends over the past 5 years. Section 4 describes the features of a good corporate tax system and best-practice measures as derived from the Organisation for Economic Co-operation and Development (OECD). Based on some of these features and practices, Section 5 considers the various options for corporate tax reform in PNG. Section 6 provides an evaluation of the main options, considering the advantages and disadvantages of each. Finally, Section 7 concludes by indicating both the short-term and long-term priorities and tax-policy implications for the corporate tax system in PNG.