The National Government’s intention to increase the Corporate Income Tax on licensed banks for next year will not only have implications on the operations of commercial banks but could see a decline in investments in the banking sector.
That’s the message from the Executive Director of the Papua New Guinea (PNG) Institute of National Affairs (INA) Mr. Paul Barker, who was skeptical about the increase in this particular tax.
“We’re wanting to have competition, we’re wanting to retain existing banks or attracting new banks to be functioning here. If we add to the fees and charges imposed by the government, then we’re not attracting players into the banking sector.”
“It seems to run counter to the government’s own objectives because we do need to roll out PNG’s banking and financial services and roll out financial inclusion to the wider public,” said Mr. Barker.
The increase in the tax from 30% to 45% payable by commercial backs starting next year, is expected to raise K240milliom in 2023 to go towards funding vital core services, but Barker said it goes against what the government wants to see happen in the banking sector.
Meanwhile, this increase in the Corporate Income Tax came about so to gradually do away with the Additional Company Tax that was introduced this year, which has a baseline value of K190million per year for all banks holding more than 40% market share.
This increase in the Corporate Income Tax will come into effect on the 1st of January, 2023.