“The IRC’s Commissioner of Tax has sought to clarify the pattern of tax collections in 2018 in a media release on 16 January. Unfortunately for this nation, this clarification simply re-enforces the fact that non-mining and petroleum tax collections fell K484 million short of the forecasts contained in the 2018 Budget. Non-mining and petroleum tax collections refers to all other taxes outside the resource sector – so it covers major taxes such as company taxes, personal income taxes, some of the GST etc. This K484 million shortfall in these “other” taxes are part of the fake revenue forecasts I stated were included in the 2018 budget, and history is now proving that I was correct”
“Any good key performance indicators should cover the period ahead. So my reference point was how 2018 actual outcomes compared with the 2018 Budget forecasts released in November 2017. This would be a fair basis for determining how things had gone – the forecast just before the start of the year with how the year actually went. However, the IRC Commissioner of Tax now only refers to updated budget figures released on 13 November 2018, after most of the 2018 year was already complete. The revenue figures updated eight weeks ago confirmed the revenue shortfall of nearly K500 million in non-mining tax revenues had already occurred! How would you react if someone comes up to you and says “Boss, let’s ignore that I had under-performed most of my targets by K500 million for most of the year, you should be pleased that I didn’t go any further backwards in the final six weeks of the year”. They would not be getting any performance pay!
“As I previously stated, I do not blame the loyal staff of IRC for the revenue shortfall in non-mining and petroleum tax collections. The fault is with the unrealistic expectations placed on them by Treasurer Abel under the requirements of Prime Minister O’Neill. Indeed, most of the tax revenue shortfall appears to be due to poor company tax collections which were some K270 million lower than predicted. This would likely reflect how poorly the economy performed in 2018 – the IMF’s latest estimate is 0% growth for 2018. Hard to make good profits which feed into company tax when growth is non-existent! The government did receive a resource revenue bonus in 2018 that was not predicted. At no stage have I said that resource taxes fell short in 2018 – read my earlier media release available at http://www.opposition.gov.pg/. Indeed, I indicated that mining and petroleum taxes were an unexpected K700 million higher simply due to higher oil and LNG prices – not because of some special efforts under the medium-term revenue strategy. The boom in oil prices also lifted other payments made outside of the IRC such as higher resource dividend payments. Overall, the government received a bonus of over K1 billion from the resource sector in 2018, and it is expected to gain a further K1 billion in 2019. Rather than sensibly using this bonus, the government has gone on an irresponsible spending spree to try and keep the government’s numbers up in the face of the Vote of No-Confidence. This is irresponsible budget policy, once again outside of the control of the IRC.
“The detailed facts are as follows. The 2018 Budget was released on 28 November 2017. It provided expectations of tax collections by the IRC broken down by major taxes for 2018. A photo of this section of the official budget papers were included in my last media release and I include them again. They are from p50 of Volume 2A of the 2018 budget – I do hope that the IRC and Treasury have access to this budget document. In the Commissioner of Tax’s media statement, he makes the unusual statement “It would help clear the air on this matter if IRC and Treasury had access to these other budget figures.” The budget figures which I set out in detail in my earlier media release were simply the figures from the budget documents contained on the official PNG Treasury website” stated the Shadow Treasurer.
“My budget response of 5 December 2017 was based on the actual 2018 budget delivered one week earlier. In this response, history now indicates that I was correct in accusing the government of fake revenue forecasts, These revenue expectations were updated on 31 July 2018 in the MYEFO, and again on 13 November 2018 in the Supplementary Budget/2019 Budget. Of course my 2018 budget response could not be based on numbers that were released nearly one year later.
“In the 2018 Budget, the IRC was expected to collect K7.819 billion. Mining and petroleum taxes were expected of K0.0895 billion. This means that the IRC was expected to collect K7.7295 billion in taxes other than “Mining and petroleum taxes” – so K7.819 billion minus K0.0895 billion is K7.7295 billion. The Commissioner of Tax has now clarified actual tax collections were exactly K8.019 billion of which K774 million was in “Mining and Petroleum taxes”. Using this more precise figure (the earlier media release from the Commissioner of Tax simply used a rounded K8 billion) actual other tax collections totalled K7.245 billion (so K8.019 billion less K0.774 billion). This means other tax collection were K484 million less than expected (K7.7295 billion less K7.245 billion).
“Let me say once again, it is time for a new coalition government that can set realistic revenue targets and get economic growth going again. Even more importantly, there is a need for a new coalition government that can spend taxpayer funds better rather than on their besties and cronies” stated Mr Ling-Stuckey.
Shadow Minister for Treasury & Finance
18 January 2019
Following is a photo of page 50 of the official 2018 Budget Volume 2A
The calculations for the K484 million shortfall in non-mining and petroleum are detailed above.
The statement by the Commissioner for Tax was carried on PNG Loop on 12 January and is shown below. There are other details that are important – for example, it appears that Company Tax collections were expected to be K1.971 billion in 2018. The Commissioner has indicated that actual 2018 collections totalled only K1.7 billion – a gap of some K270 million or over half of the revenue shortfall. The potential fall in personal income tax is of concern. Not enough information was provided to check on GST revenue collection figures (although some of these are collected by Customs).