Excise rates increased to meet PN6 budget shortfall

By Sophie Foster Hildebrand

Papua New Guinea prime minister Sir Mekere Morauta has lifted excise rates on tobacco and alcohol, and increased the state cut from gambling, to meet potential shortfalls in government revenue.

He told parliament last month that although “tax collections to date are slightly above projections, and expenditure is running to budget”, a potential shortfall was predicted. “The government has become aware of some potential shortfalls in total revenue collection for the year and proposes to rectify the problem with four small, one off changes to collection levels,” he said.

The problem was picked up after improvements were made to the government’s ability to monitor budget

implementation.

“Indications are that the revenue budgeted for the ‘non-tax revenue’ category, specifically from items such as land rates, fisheries licence fees and civil aviation landing rights charges, has been over estimated. “In order to achieve the final budget outcome that we have planned for.

prudence demands that corrective measures should be taken now, to compensate for the

projected shortfall.”

The prime minister stressed that increase in excise rates and a greater cut from gambling “do not compromise the overall revenue strategy of the budget, which is to ensure that revenue measures do not hinder investment and economic growth”.

With those words, he increased excise on the majority of tobacco products by an average of 52 per cent, and the excise on spirits by 33.3 per cent.

He said the excise amendment was designed to bring PNG in line with other countries. “Many countries, including Australia, tax beer more lightly than spirits.

In Papua New Guinea the opposite is the case. The current fiscal regime actually encourages people to drink more spirits than beer.

“Set the damage that spirits undoubtedly cause against the comparatively low cost, and I know the House and the people of Papua New Guinea will applaud this measure,” he said. He added that by world standards, Papua New Guineans pay very

little for tobacco products, which was also “an inducement to indulge in one of the unhealthiest practices known to society”.

The revenue increase measures also

proposed include changes to the Gaming

Machine Act, designed to return more gambling revenue to the people of Papua New Guinea, without lowering payouts, the prime minister said.

“The Internal Revenue Commission takes 60 per cent of the profits from poker machines and the remaining 40 per cent is distributed four ways. Fifteen per cent goes to operators, 15 per cent to provincial governments, 60 per cent to site owners and 10 per cent to the trust account. “This amendment will reduce the payout to operators to 10 per cent and to site owners to 55 per cent, and increase the payout to the trust account to 20 per cent.

The government also decided to increase its revenue from bookmakers, doubling the tax.

Sir Mekere said the changes would bring an extra 22 million Kina over the remaining nine months of 2000, to cover the projected shortfall in non-tax revenue. ■