The National Government’s moved to increase the Corporate Income Tax on licensed banks for next year has met some skeptical responses from the business community and independent Think- Tanks like the Papua New Guinea (PNG) Institute of National Affairs (INA)
PNG INA’s Executive Director Mr. Paul Barker said that this further increase in tax will have implications on the banks and its customers and clients going forward, even though the government’s intention was to gain enough tax revenue to fund vital core services.
The government revenue measures for tax revenue in the 2023 National Budget will see the increase in the rate of Corporate Income Tax from 30% to 45% payable by commercial banks.
From 1st January 2023, the rate of company tax will increase. This is expected to raise K240milliom in 2023 to go towards supporting the increased spending on law and order and infrastructure, and for more teachers and nurses.
The state will closely consult with the banking industry in the first half of 2023 and consider if a different type of tax, such as an additional profit tax, may be more appropriate from 2024 onwards while still raising the required revenues.
However, Mr. Barker said that this could impact the banks’ clients, customers and entities that are also getting revenue from the banks.
“At the end of the day, it restrains the banks from investing and expending services into rural areas. It restrains banks in cross subsidizing the engagement with smaller branches or investing further in improved services for clients, increasing financial inclusion, and results in the banks sustaining or even increasing bank charges,” said Mr. Barker.
Meanwhile, the change 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 was change due to public feedback and as a result the State decided to change the form of the tax introduced on the banking sector