PNG Trade Union Congress Comes Out Against New Housing Tax

Taxation of housing allowances set to go into affect soon; Employees taxable income to drastically increase

PORT MORESBY, Papua New Guinea (PNG Post-Courier, Jan. 27, 2017) – The PNG Trade Union Congress has now joined in expressing serious concerns on the new housing tax which will come into effect next fortnight.

The new taxation measures was supposed to be effected as of January 1, but most companies got the notification from the Internal Revenue Commission on January 20 and will take effect next pay day, which is next week.

Hundreds of working class Papua New Guineans living in company-provided housing could lose up to two-thirds of their fortnightly salary.

This is because the rent value of the employer-supplied accommodation will be included with the actual salary component.

So, if a worker earns K600 [US$185]  a fortnight and lives in accommodation valued at K700 [US$216] a week in any of the country’s larger cities like Port Moresby, Lae or Goroka, for example, the worker will be taxed on the sum K2000 (total benefits of K600+K1400) [US$617] – even though he or she does not actually receive the extra K700 in cash every week.

PNGTUC general secretary John Paska said it was unfair. He said the Government had failed to provide housing for workers and is now passing the cost to private sector provided housing.

He said a review of this tax was a must that must be addressed in the Supplementary Budget that would come up during the current Parliament session.

“We agree to concerns that have been raised across the board, on the housing tax. The issue is not so much per se but rather the disproportionate quantum between the percentages of tax imposed against income earned as well as the sudden imposition of the tax.”

“There are two sides to the ledge. There’s the income earned column and the income spent. Wages earned by most workers is already heavily taxed at various level such that, there is no such thing as” take home pay. Those with some semblance of take home pay can barely stretch it over five days.

“It means over the next five days to fortnight they are living on borrowed money from loan sharks who charge compound interest on money lent. It’s a vicious cycle already as it is.”

He said take home pay is a critical component of wages in any country because it is a key indicator of wages share of national income as well as purchasing power parity.

He said a drop in take home a magnitude of which the current housing tax imposes has serious implications for the livelihood of workers and their families.

“It also cuts deeply into the savings ability of workers. The housing tax is not well thought out or calculated” He said all revenue measures place a burden on workers’ pay which trigger off a ripple effect that force on claims for wage rise, industrial action of wage claims are not settled, disruption to services and a hike in prices of goods and services.

“The cruel irony to all of this is that, the state and much of the private sector have absolved themselves from providing homes to employees and they want to tax workers living in homes.”

“Workers in PNG just constitute just 10 per cent of the population, they however contribute the greatest share of revenue earned internally through tax through tax to the state. Workers have often been unfairly shunned by politician as the “lucky ones “who are employed and earn fortnight wages. These 10 per cent however, effectively keep the nation afloat. They deserve some breathing space

This tax suffocates them and their children.”

“There are other revenue measures that should be explored and taxed. The IRC has adopted a draconian approach that penalises workers and their families.

“The tax should be imposed gradually rather than give a shock treatment in the manner they have done. We appreciate that the government has undertaken to review provisions of the budget dealing with tax such as this and call on the government to ensure that this is done.”

“It’s a dream for workers to have a home of their own. The tax mercilessly and callously destroys this dream and aspiration.”

PNG Post-Courier
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