Capital Gains Tax Not Tabled with 2022 PNG National Budget : Koim

Statement 

The much-anticipated Capital Gains Tax (CGT) was not tabled together with the 2022 National Budget last Thursday. Before I offer some details of the CGT, I am compelled to clarify Internal Revenue Commission's (IRC) position on the proposed "dominant Industry player" levy. We have been bombarded with insurmountable questions since the law was tabled.

Capital Gains Tax Not Tabled in 2022 PNG National Budget : Koim 

At the outset, let me clarify that the responsibility to develop tax policy and law is vested with the Department of Treasury. IRC only administers the law. Treasury will therefore be in a better position to respond to the concerns surrounding this new tax and its policy bases, and the Treasurer has already done that. I am therefore not at liberty to add any further comments, suffice to highlight that the Treasurer has indicated his willingness to listen and refine the law. However, if the law is passed, IRC is obligated to administer it.

Having not proposed this new tax, I am not suggesting that IRC plays no part in proposing tax law changes. One of the new laws that IRC has been pushing for this budget, is the introduction of the CGT. The CGT is part of the major tax law reform under the Medium-Term Revenue Strategy (MTRS). It was widely circulated and consulted with community, industry and tax professionals for over 18 months.

A lot of developed as well as comparable emerging countries have the CGT. The CGT will satisfy the principle of equal treatment under the tax law, a fundamental tenet of the rule of law.

Just to offer some examples: we continue to watch helplessly, whilst those who come into this country with very little, acquire assets very cheaply, including mining and petroleum tenements, and sell off, making huge windfalls. We watched helplessly about the Inter Oil and PAC LNG transactions in the Papua LNG. We will continue to watch helplessly if Westpac, Digicel and Oil Search anticipated transactions proceed. We see people acquiring land cheaply and making huge gains on sales. That is where the big revenue is, and we are missing out.

We are not taxing on the capital gains. The CGT has sound policy bases and when passed, would not only fix a gap in the law but will result in a substantial increase in tax revenue for the Government.

Yes, stamp duty tax is there, but it is only a small fraction of the transaction. In addition, Stamp duty is usually chargeable to the purchaser which is an additional cost to the buyer. As such, we find instances where a lot of property purchasers structure transactions to reduce their burden hence evading tax.

We were hoping that the CGT could be imposed on the seller (the one gaining on the sale of capital assets). We were also hoping for, as part of the package, a corresponding reduction in stamp duties as a trade-off to ease the burden on those who are willing to spend money to acquire properties during these harsh financial conditions.

We are hoping that the CGT will be passed soon.

Next : Solomon Islands Police arrest more than Hundred suspects for riot related incident in Honiara