Governments’ share from natural resources sector declined: Institute

The National aka the Loggers Times | July 30, 2019

THE Institute of National Affairs stated in a seminar recently that the Papua New Guinea governments’ share from its natural resource sector has declined in the recent years and seems low compared to other resource rich countries.

Facilitating the seminar was visiting lecturer in economics at the school of business and public policy associate professor Martin Davis and department of economics at the Lebanese American University, assistant professor Dr Marcel Schroder. Davis said data from the Extractive Industries Transparency Initiative’s (EITI) annual reports from 2006 to 2017 was used to analysis the governments’ take from the resource sector by using a simple theoretical model to compare PNG and other resource rich developing countries.

Schroder said from the data collected there had been a decline in the State’s take over the last 10 years and that last year it had been very low for international standards. He said the two factors that may have caused the decline was the price of the commodity and the other was when there was a lot of new projects in the country, the governments’ revenue seemed to decline.

Schroder said the maturity of a resource project for example the liquefied natural gas (LNG) project which came in 2014 boosted the resource gross domestic product significantly but since it is a new project, the government could not expect to receive a lot of revenue from it yet.

He said PNG was the only country in their database of 50 countries where the government received large payments of salary and wage tax and that corporate income tax and royalties seem unusually low.

“The maturity of a resource project for example the LNG project is fairly new and this projects tend not to generate much profit at the beginning so the government does not receive much revenue from this new projects, they come later as the project matures,” he said.

“PNG is a developing country which means funds for crucial spending such as infrastructure, health and education are needed today rather than tomorrow.”

“Therefore, avoid deals with multi-national companies that lead to extreme back-load of fiscal take and that the government should also avoid giving many incentives.”

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Filed under Financial returns, Papua New Guinea

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