Lifting Papua New Guinea’s tax credit scheme to five per cent would see a big boost in road building and maintenance, according to the General Manager of West New Britain’s Hargy Oil Palms, Graham King.

Hargy Oil Palms’ site in West New Britain

Many resources companies, primary producers and tourism operators in PNG contribute directly to the maintenance of essential infrastructure through the tax credit scheme, which allows them to claim a credit against tax payable of up to 1.5% of assessable income.

Hargy’s Graham King

Papua New Guinea’s palm oil industry has been calling for an increase in the tax credit allowance from 1.5 per cent to 5 per cent for some years. Hargy’s Graham King says the issue is now urgent, because of the worsening standard of national and provincial roads in West New Britain (WNB).

‘Even though the oil palm industry in WNB generates K1 billion in export income per year, only K10 million is allocated to the Department of Works for road maintenance in West New Britain,’ he tells Business Advantage PNG.

‘In Bialla, our project area, there is 190km of the New Britain Highway and 570km of smallholder roads.

‘The average annual rainfall is 4800mm and, every wet season, bridges, culverts and drains are washed away and need replacing.

‘An analysis by KPMG in 2013 showed that the cost of poor roads adds K23/tonne to the cost of transport for palm oil producers, says King. This equates to K5.3 million per annum in additional costs to smallholder growers in Bialla alone.’

Story continues after advertisment...

‘We still don’t have permanent bridges over our key river crossings, Ivule and Tiauru.

‘There has not been any government funding for the smallholder road network since 1995.’

Poor roads

The recently renovated Sir Manasupe Haus (popularly known as the ‘Pineapple Building’) in Port Moresby is a prominent example of a project conducted under PNG’s tax credit scheme. The renovation was conducted by Oil Search Ltd. Credit: Business Advantage International

An analysis by KPMG in 2013 showed that the cost of poor roads adds K23/tonne to the cost of transport for small palm oil producers, says King. This equates to K5.3 million per annum in additional costs to smallholder growers in Bialla alone.

King says the current value of the tax credit scheme to Hargy Oil Palms is K3 million, all of which is spent maintaining the New Britain Highway.

‘This is the bare minimum needed to keep the New Britain Highway trafficable.

‘Often the oil palm companies are able to implement road and other construction projects at a higher standard.’

‘If it was lifted to five per cent, we would have about K10 million and this would allow us to upgrade smallholder roads as well as the highway.

Public-private partnerships

Another possibility, says King, is to partner with the District Administration, so that the district funds could be added to the tax credit scheme funding on a public–private partnership basis.

‘Often, the oil palm companies are able to implement road and other construction projects at a higher standard and at a much lower cost than when these projects go through the normal government tender and contract process,’ he observes.

Industry is currently waiting for the O’Neill Government to announce its response to the Tax Reform Committee’s recommendations, which were presented last October.