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
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.
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.
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.
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.
Sam Koim, OBE