“This is the fourth of a five part response to the failings of the PNC tax tariff policies. The first part of the response focused on how the Treasurer Abel lied about the 25% tax tariff on milk did not apply to UHT products. The second part covered how the government has ignored expert advice from its own Independent Consumer and Competition Commission on building competitive markets for the flour industry. In the third, the Alternative Government put forward a constructive suggestion for a new Consumer Council to better protect consumer interests and take into account the cost of living pressures on PNG families. This fourth will discuss the timber manufacturing industry as an example of the approach under the former tariff reduction program introduced in response to the PNG’s last economic crisis in the late 1990s under the PNC. The fifth and final response will include better ways under an Alternative Government to increase incomes and jobs in PNG.

“PNG’s last economic crisis was in the late 1990s under the PNC. One of the lessons from that crisis was that the PNG economy needed to become more dynamic. There was a need not just to protect local industries, but rather to make them internationally competitive. That was the real path to sustainably increasing PNG jobs and incomes. There was also the need to reduce the high cost of living facing PNG families. However, change always involves costs, and there was a need for time to allow existing PNG industries to adapt to the international market place. So under the National Alliance, a gradual program over more than a decade of tariff reductions was put in place – in the interests of industry but also in the long-term interests of PNG consumers. This is what APEC 2018 should have been about – making PNG industries efficient and competitive. Instead, the PNC government under Prime Minister O’Neill and Treasurer Abel have thrown out the lessons of the past, and introduced nearly a thousand tax tariff increases since illegitimately coming to power in 2017. The local timber industry is one example” stated the Shadow Treasurer.

Abel quote

“The tariff on veneer and plywood have been in place for some years but the tariff codes had to be corrected in terms of rates applied.”

Ling-Stuckey Response

This is a dangerous half-truth. As I indicated in my media release, there were tariffs on veneers and plywoods of 30%. Indeed, they have been in place, although at declining levels, for decades. However, the obscure language of “the tariff codes had to be corrected in terms of rates applied” is hiding the fact that tariff rates were increased to an extraordinary 50%. This is what I said in my media release. The issue is not whether they have been in place for years, the issue is that the Treasurer decided to increase them to 50%.

in responding to the economic crisis of the late 1990s, the National Alliance government agreed on a series of activities to make the economy more competitive, to lift economic growth rates especially in the non-resource sector, and to create more jobs. These policies were all working until 2011. The PNC government has reversed these policies which has led to a collapse in non-resource growth rates and to a reversal in job creation. One element of this program, a program which had many elements including making the costs of local business lower, was a progressive, balanced and timely reduction in protectionist levels. The National Alliance legislated to slowly reduce the tariff rates from 40% in 2006, to 35% in 2011, to 30% from 2015 and to 25% from 1 January 2018 (see attachment). This was part of a 12 year program of gradual tariff reductions for local firms to give them a chance to become more competitive. This was a policy designed to provide balanced support to local manufacturing, to encourage them to become more competitive, and to balance this interest with reducing the cost of housing and other construction in PNG. It was a policy of balancing interests. There was still a plan to have a 25% tariff in place. But rates of 50% are just too high.

The current PNC government and its Treasurer just do not understand what is required for good public policy and the balancing of different interests. This is why I am supporting the creation of a Consumer Council so PNG consumers have a stronger voice in decision-making, to help get the balances right. One would have hoped that PNC politicians would also be protecting the rights and interests of consumers. Clearly, they are just interested in looking after their besties.

Abel quote

“A relatively low tariff has been introduced on imported furniture and tin fish to support the development of onshore investment and jobs especially where we have the natural resources and existing local products.”

Ling-Stuckey Response

The tariff on imported furniture has been increased from 15% to 30% – this is not a low tariff. The tariff on tinned fish has been increased from 15% to 25% – this is not a low tariff. Both tariffs were due to fall to 10% from 1 January 2018 under the National Alliance tariff reduction program.

The Alternative Government continues to support policies to increase jobs and local incomes. This has been a focal point of my last two Budget responses. So there is total agreement on the policy objectives of “supporting on-shore investment and jobs”. However, the Alternative Government knows that Treasurer Abel is pursuing policies that have failed in PNG and in other developing countries. As Vietnam prepared for APEC, it lowered tariffs on over one thousand items. As PNG prepared for APEC, it increased tariffs on nearly one thousand items. In the next part of my response, I will set out examples of better policies to increase PNG jobs and incomes” stated Mr Ling-Stuckey.

 

Hon.Ian Ling-Stuckey,CMG.MP
Shadow Minister for Treasury & Finance

 11January 2019

Details

A sensible tariff policy approach

The National Alliance government, in responding to the economic crisis of the late 1990s, agreed on a series of activities to make the economy more competitive, to lift economic growth rates especially in the non-resource sector, and to create more jobs. These policies were all working until 2011. The PNC government has reversed these policies which has led to a collapse in non-resource growth rates and job creation. One element of this program, a program which had many elements including making the costs of local business lower, was a progressive, balanced and timely reduction in protectionist levels. The types of progressive changes are shown in the following extract of the revised Tariff Act introduced by the National Alliance Government. This is page 277, showing the gradual reduction in tariffs on plywood and veneer products. These changes were gradual, and aimed at getting the balance right between local production and lowering housing and other building costs. PNG consumers have lost out with the current PNC government’s decision to deliver increased profits to its manufacturing industry besties with a tariff now of 50% while the consumers of PNG are the big losers. We need a PNG Consumer Council to push back against such tariff increases.