Category: Media Notices

GST TO BE COLLECTED DIRECTLY FROM IFMS “NO TIN, NO CHEQUE”

The collection of Goods and Services Tax (GST) by the Internal Revenue Commission (IRC) has been administratively burdensome thereby allowing a big non-compliance gap to exist. Except for a few, a significant number of government contractors make up this gap. 

IRC is taking a number of measured steps in closing that gap, starting with those who receive business from the government.

At a small but significant event held today at the APEC Haus, the Minister for Finance, Hon Sir John Pundari, launched what is dubbed as “GST Section 65A Notice” to be configured in the Integrated Financial Management System (IFMS) to facilitate the direct transfer of GST components directly to IRC on account of suppliers.

This is a monumental step forward in tax administration where available financial technology (IFMS) is being used as an intermediary to usher effective collection.

Our tax administration system which we’ve adopted from abroad presumes that the taxpayer is always honest in assessing and declaring his/her tax liability and pay on time. Whilst this may work well in generally honest societies, it is challenging for a society such as ours. Our unique compliance challenges add to the burden IRC has in administering and collecting taxes. This also results in a significant tax gap we currently have – a gap between what we are collecting and what we supposed to collect.

Since I took office in 2019, we have been exploring options of reducing the cost of tax administration, by adopting effective collection measures, pluck leakages and improve compliance. We have started some reform projects in 2020 and continued to include them in the 2021 work plan. 

We share the cry of our working class concerning the high rates of taxes imposed on their salary and wages. However, we have to offer the Government an alternative to offset the foregone revenue and that is why we aim to make GST the number one revenue earner for the Government. GST is broad-based and its tax base is the entire country. We believe that if we close the GST gap, we will collect enough revenue for the government to explore reducing the SWT.

We have initiated several projects to achieve this strategic intent. One of the activities that would help us achieve this is the section 65A project. The GST section 65A project was initiated in August of last year and will be expanding the program this year.

GST section 65A is a compliance provision with the GST legislation. This provision authorises the Commissioner-General to issue a notice to a recipient of a good or service. The GST registered suppliers of those goods or services have not been compliant with their GST obligations. The notice/letter issued by the Commissioner-General authorises the recipient of the service or good to withhold the 10% GST from the supplier and remit it directly to the IRC. The supplier will then lodge its GST return each month to claim the GST withheld.

We have private companies that benefit from the taxes by receiving businesses from the Government and charge the respective government entities GST but fail to declare or even remit the GST to IRC when due. By this arrangement, IRC will be collecting the GST component directly from the Government entity. 

We have trialled the GST section 65A project with 15 agencies and have raised well over K20 million in the last 6 months. This was done manually.

Today’s launching brings this arrangement to a new height and introduces a lot of efficiency and cohesiveness. It sets the tone for the path we want to embark on – to move away from laborious methods of collection by investing in technology.

We will have 36 national government departments that currently use IFMS to participate as part of phase 1 next month, followed by statutory authorities in the second phase and sub national entities in phase 3.

Those who are engaged by the Government entities must also be aware that under this arrangement, all suppliers without a TIN number will have their payments on hold until being formally registered with the IRC.

The IFMS configurations will be switched on May 1, 2021 and we will be using the balance of this month to undertake awareness and issue appropriate notices.

Whilst we set out to effectively collect GST directly, we are also conscious that it is not the ‘net GST’ hence we will increase resources and methods of verifying GST returns to ensure that our processing area is not clogged, and those who deserve refunds are paid on time.

At this juncture, I would like to sincerely thank Minister for Finance for his receptiveness to this exploring new ways of revenue collection, the Secretary for Finance and his department for having the Seeing Eye to see and the collaborative hand to deliver this project. Where our mutual interests lie, we remove the territorial thinking and collaborate without the need for use of compulsive powers and that is what happened today. I also owe a debt of gratitude to technical teams from IRC and DoF who have worked hard to get the details correct.

Yours in Making a Difference,

Sam Koim, OBE

Commissioner General

Internal Revenue Commission

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A STRONG VISION TO TRANSFORM IRC.

COMMISSIONER GENERAL

A STRONG VISION TO TRANSFORM IRC

The Commissioner General of the Internal Revenue Commission (IRC) announced a clear vision to transform IRC to become a Robust, Modern and Efficient Tax Administration by 2025. Speaking at the launching of the IRC Annual Work Plan on Thursday 28 January, the CG inspired and emboldened his staff and management to embrace the change. 

This news update details the Commissioner General’s message and highlights IRC’s performance in 2020 and its strategic focus for 2021 to 2025. 

A. Highlights of 2020

Tax Performance

Last year has been a very challenging year for IRC, as it has been for many organisations in Papua New Guinea and around the globe. Our reform activities were buffeted by the Coronavirus restrictions and tax collections declined due to subdued economic activities. We were also unable to carry out most of the compliance activities such as field audits and inspections. 

Our initial Covid-19 revenue impact assessment in April 2020 projected a revenue loss of about K2.16 billion in a mild case scenario. However, due to a number of mitigation strategies we adopted, and owing to the Government’s decisive action to reopen the economy, we managed to collect a total of K8.2 billion in 2020. 

Of this, we transferred K578 millions (60% of GST) Provincial governments.  A further K228 million was provided to taxpayers as GST refunds and K8 million transferred to provincial governments as bookmaker’s revenue.  After the disbursements totalling K814 million, the net amount of K7.38 billion was transferred to the Waigani Public Accounts (WPA) to fund the National Budget. This is 4.3% (K306 million) above the 2020 supplementary budget projections.

All taxes performed poorly except Personal Income Taxes (10% increase) and Royalty/Management Fees (17%). Mining and Petroleum Taxes fell by a shocking 75% despite the fact that the gold price spiked a record high to US$2000 per ounce. 

The 10% increase in the Personal Income Taxes is attributed to the decision to switch off unverified GST credit offsets against Salaries and Wages Taxes (SWT) which resulted in an average revenue increase of K30m per month. 

Internal Integrity, Staff Discipline and Staff Welfare

IRC is a high risk organisation and hence has to look after its staff well enough as a disincentive to fraud and corruption. Therefore, a raft of staff terms and conditions were improved last year. On the other hand, IRC is establishing a robust system of internal controls to detect and address risks of fraudulent activity. Despite Covid 19 disruptions, 16 Internal Audits were completed and 27 fraud and corruption investigations were completed. 

We believe that an organisation can function properly if it’s internal controls and governance framework is functioning. 

Funding Support

Although IRC collects more than 80% of the revenue required to fund the National Budget, IRC relies on the Government for funding support. IRC received a total funding of K88.6 million from department of Finance in 2020. This is 81% of our total budget appropriation of K109.6m. Delay of funds is detrimental to timely revenue collections due to the time lag in collections from initial audit-inspection-assessments and tax payment.

The IRC requires certainty with its funding allocation in order to see improvements in revenue throughout the year.

Reform Projects

As part of the Medium Term Revenue Strategy (MTRS), IRC is undergoing a major organisation redesign work, assisted by the International Monetary Fund. This work is anticipated to realign

the organisational structure and the functional areas, with a separation of roles between headquarters and operational functions.  

Despite the Covid-19 disruptions, a significant number of projects featured our 2020 Annual Plan and the MTRS Projects were completed whilst some are still continuing this year.  

B. Focus of 2021 and into the Future

My vision as the Commissioner General’s is to transform IRC to be a Robust, Modern and Efficient Tax Administration by 2025.  Consistent with that Vision, a number of strategic pillars have been adopted to direct the key reform activities between 2021 and 2025. 

Our present challenges of huge uncollected tax debts and high rate of non-compliance, amongst the many, cannot be resolved overnight with a single solution. The starting point is recognising that the self-assessment tax regime that PNG has adopted works well in societies that are generally honest and compliant. PNG’s societal preconditions present unique compliance challenges hence a raft of interventions have to be introduced to secure voluntary compliance.  

We also want to avoid projects that would result in incremental progress or what I call repetitive fire-fighting solutions. We are cognisant of the fact that we cannot change everything. However, we can change some things that can change everything. We want to rally the organisation around few bold ideas that will drive the change. These few bold ideas are mostly interrelated and interdependent. 

We are therefore committing the first few years of my tenure as the Commissioner General, to create underlying business structures that would support the creation of innovative ideas and perpetuate our forward momentum. 

The 2021 Annual Plan features the following Strategic Pillars:

Amongst the key activities featured under the seven pillars for 2021, some of the core tax activities are:

  • Collection at Source: We will make sure that we collect a lot of taxes at source with the aim of closing the tax gap. We will be rolling out the S.65A project and introducing GST Monitoring System. 
  • Taxpayer Services Improvement Project
  • Taxpayer Mapping and Registration Improvement
  • Tax Crime Investigation and Prosecutions
  • Empowering Provincial Tax Centres to be effective in collecting taxes. 
  • Etc.

C. CONCLUSION

Our five-year vision is better depicted in the following picture:

“We cannot Change Everything, but We Can Change Some things that can Change Everything”

I am confident that we can change the organisation by changing the “few main things” because I am supported by intelligent, experienced and committed Commissioners, Assistant Commissioners, Directors, Managers, Team Leaders and Staff. Together we can make a difference.

God Bless

Sam Koim, OBE

Commissioner General

Media Release Notice

  • Reinvigorating Certificate of Compliance – [more]
  • General Notice to Suppliers of IRC – [more]
  • GLOBAL FORUM: PNG Peer Review Report on the Exchange of Information on Request – [more]
  • PUBLIC NOTICE: ISSUANCE OF A SECTION 65A NOTICE – [more]
  • Appointment for Acting Commissioner of Tax – [more]
  • Small gains to Report 14.5.2020 – [more]
  • MOU between IRC and IPA Media Release – [more]
  • March 2020 Newsletter. – [more]
  • ANNEX TO PUBLIC NOTICE 1st APRIL 2020 – [more]
  • Annex to Public Notice 1st April 2020 – [more]
  • COVID 19 RESPONSES – TAX ADMINISTRATIVE RELIEF MEASURES – [more]
  • CG’s 10th of 2020 message: Corona Virus Alert and Update – [more]
  • IRC’s enforcement action to foster compliance – [more]
  • Tax regime too complex for SMEs to comply says Koim – [more]
  • Tax Administration Instruction_making payments to IRC_advert_23.05.19 – [more]
  • Salary & Wages Tax Advert.06.06.2019 – [more]
  • Taxation of Superannuation in Papua New Guinea – [more]
  • REVENUE COLLECTION AND PERFORMANCE IN 2018 – [more]
  • Public notice re CBCR-Final – [more]
  • CbCR – Information sheet updated – [more]

Farewell four (4) long serving staff

Officially farewelled, four (4) retiring staff, together totalled 162 years serving PNG’s Tax Office.-Mr Benjamin Harry-Mr John Heni-Mr Aua Aia-Mrs Martha Kiapgugu.Thank you for serving with passion and dedication in the tax office for the many years. We wish you well in your health and future endeavours..

IRC and AGO collaborate

Commissioner General Sam Koim met with Acting Auditor General, Mr Gordon Kega and his senior management today, discussing matters for collaboration and how to hold Government entities accountable in contracting with Tax Compliant private contractors, consistent with the recent directive by Acting Chief Secretary, Amb. Isaac Lupari, CBE.

4th Tax Technical Training course in Kokopo

Recently completed 4th Tax Technical Training Course delivered at Kokopo for the IRC officers based in Kokopo Tax Centre. Congratulations to the Kokopo IRC office team and well done to the Tax Technical Training Facilitators Team for putting alot of time and effort in material development and for delivering the modules.

Potential collaboration with India’s Tax Administration.

Commissioner General Sam Koim had lunch with Indian High Commissioner to PNG, His Excellency Sushil Kumar Sungal today, discussing potential collaboration with India’s Tax Administration.

India has one of the well advanced IT infrastructure that enables the collection of GST. India has dual GSTs with Central Government and State Governments, and multiple GST rates for different industries. Despite the complexity, they have set up the digital tools that enables them to collect GST.

One of IRC’s aim is to make GST as the number one revenue earner for the Government and hence exploring ways of effective collection.

IRC meets with the Banks

IRC had a very constructive meeting with the banking sector today at the Hilton Hotel. This was a Heads of Banks meeting organised by the Commissioner General, Mr Sam Koim, to gauge the views of the industry on some of the reform initiatives of IRC. The banks are considered as having an important role in the functioning of our tax system. Working constructively with the banks therefore will help us gain a shared understanding of the commercial context and compliance behaviours of our taxpayers. The Interactive meeting was attended by heads of BSP, Westpac, ANZ, Kina Bank, Credit Bureau and Director of FASU. Commissioners, a number of ACs, and technical staff of IRC were also present. A raft of issues of mutual interest were addressed at the meeting.

PUBLIC NOTICES

Notice of Management Fee Withholding Tax - [more]

Public Notice: PRWT – Prescribed Royalty Withholding Tax - [more]

Taxpayer Public Notice – Management Fee Withholding Tax - [more]

Reinvigorating Certificate of Compliance - [more]

General Notice to Suppliers of IRC - [more]

GLOBAL FORUM: PNG Peer Review Report on the Exchange of Information on Request - [more]

PUBLIC NOTICE: ISSUANCE OF A SECTION 65A NOTICE - [more]

Appointment for Acting Commissioner of Tax - [more]

Small gains to Report 14.5.2020 - [more]

MOU between IRC and IPA Media Release - [more]