The government is limited to fighting inflation


The high cost of living in Papua New Guinea will not be avoided, as there is little the government can do to prevent it, according to Peter Burnie, PwC tax partner.

Mr Burnie was answering the questions in this document about tax changes and this can influence inflation in the country.

He said that the increase in the cost of goods and services in the country is due to a number of factors, most of it being imported inflation, as PNG relies on a lot of imports, which ultimately pushes up prices. price.

“Yes, there will be inflation and there is not much in the budget that will help improve that, but to be fair, the PNG government cannot do much to prevent the immediate effect, “he said.

Mr Burnie added that inflation rates will remain the same as last year, but with the assumption and concern that they are under control.

He added that inflation has been driven up by rising oil prices and COVID-19-related disruptions in supply chains, lack of productivity or falling commodity prices.

A general summary from the PwC Group also said that sustained high inflation poses a risk to the outlook in an environment of low wage growth.

If the temporary factors that contribute to high inflation do not subside, inflation could slow the global economic recovery.

In addition, prolonged higher inflation would also prompt central banks to start raising interest rates earlier to slow inflation. Rising interest rates would slow economic activity as the cost of borrowing and servicing debt increases. This would also lead to a drop in consumption and investment.

Mr Burnie also pointed out that Goods and Services Tax (GST) revenues are expected to increase in 2022 to just over K5 billion (from just over K4. K 1 billion in 2021), an increase of 22%.

However, he noted that it is impossible to determine the expected source of the growth from the budget documents – however, you might assume that such an increase in the GST is likely to come from the way in which the application of the Section 65A is measured or even non-payment of GST refunds.

Mr Burnie said non-payment of GST refunds is a challenge for businesses operating in PNG and whose businesses still owe money.

Unfortunately, it is not clear how the GST refunds owed to PNG taxpayers were accounted for in the budget for 2022.

Problems related to non-payment of historic GST refunds have negatively impacted the resource, agriculture and tourism sectors in particular, as well as many PNG businesses that have struggled over the years. last two years.

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