By ORCHY REX
SHADOW Treasurer Bryan Kramer (Madang) raised concerns in Parliament today about what he described as an “illogical” application of the Goods and Services Tax (GST) on government grants to districts and provinces.
He said it was a case of “taxing tax money”.
In a question directed to Treasury Minister Ian Ling-Stuckey, Mr Kramer said applying GST on service delivery and infrastructure grants, funds appropriated by the National Government for the benefit of the people again resulted in money being diverted from essential services.
“Every year the Government pays K2 billion, and the Government or IRC (Internal Revenue Commission) collects K200 million back. So you are taxing tax money,” Mr Kramer said.
“If a district receives K20 million, K2 million is sent back to IRC, money that is supposed to be spent on essential services to the people.”
Mr Kramer, who is also the Shadow Minister Finance, and National Planning, said contractors awarded district-funded projects are required to charge GST on their invoices.
“The GST component is then withheld and remitted to the Internal Revenue Commission (IRC), instead of being utilised directly for development projects.
“Other countries, like Australia and New Zealand, allow government entities to claim GST refunds or exempt them entirely from GST when it comes to services in health and education,” he explained.
“But here in PNG, DDAs and provincial governments cannot claim refunds. So again, we are taxing money already allocated by the state.”
He further proposed a collaborative effort between his office and the Treasury Department to introduce amendments to the GST regime.
“Would you agree for my office to work with your office to bring a proposed amendment to the IRC Tax Act to introduce zero-rating or tax exemptions for government institutions, including this National Parliament and District Development Authorities?”
In response, Treasurer Ling-Stuckey acknowledged Kramer’s concerns and indicated that the matter could be resolved through administrative means rather than legislative changes.
“There is a decision by the government to exempt GST from DDAs, and eventually provincial governments.
“Most of us agree with the sentiments shared by the Shadow Treasurer. My office certainly looks forward to working with him on any matters to ensure a more effective budget,” he said.
The Treasurer also clarified the legal foundation of the current GST framework, citing Section 65A of the Goods and Services Act 2003, which empowers the IRC Commissioner General to issue special notices regarding tax collection requirements.
“Section 65A has been part of our GST system since at least 2007, and the Commissioner General has the discretion to determine special circumstances and issue or withdraw notices accordingly,” he said.
The Treasurer added that the Government had already taken steps to ease the GST burden on households by exempting 13 key household items from GST like rice and tinned fish.