From the beginning of next year in Papua New Guinea workers who live in housing provided by their employers are to be taxed on the market rent rate that that house could command.
The change was announced in last month's Budget.
The Post Courier newspaper says it could mean large numbers of workers paying hundreds of kina more a week in tax, undermining their ability to save and invest, and potentially push them into squatter settlements.
It is not uncommon in other countries for such salary perks to be taxed but Don Wiseman asked the executive director of the Institute of National Affairs, Paul Barker, what impact it might have in PNG.
Port Moresby, PNG.
Photo: RNZ/Johnny Blades
Transcript
PAUL BARKER: I'm not even exactly sure the numbers, the government's housing stock has diminished considerably because they sold their houses over the 1990s to their occupants and failed really to rebuild extensive replacements but there is certainly a certain level of government housing and many companies have some level of housing and this is an exercise in revaluing houses that would have been deemed to be in a poorer area and a lower value house in the past, have been revalued now to be deemed sometimes high value area or high value cost and this has suddenly been imposed at a revised commercial rate with the aim of taxing it at that rate and clearly if you are an employee who may be on a lower or middle income or even on the higher income with lots of relatives staying, suddenly to be receiving a considerable potential increase in the deemed salary or salary and allowances even though the houses remain the same and maybe not very well maintained if it's a government house, would be a considerable burden on the household.
DON WISEMAN: These workers are presumably on contracts and this is part of their contract, how can the government unilaterally effectively rewrite those contracts?
PB: That would be also a major issue because yes even in the tax department decided they were going to increase the tax collection if there was a major reduction then effectively the net salary then that would be a big impact on the terms and conditions and understandably they would demand a re-negotiation of their gross pay to make up for the short fall and if, as I say, it was going to effect significantly nurses, doctors, police, and others, as I say, most of their housing is in a pretty atrocious state so it'd be hard to imagine any significant increase but in some cases it could be but certainly these are people who it is hard to recruit into the public sector in the first place, this would be an extra way to make sure that you lost them.
DW: Now it's been suggested by the local post courier that if people were forced out of their subsidised housing they could end up having to move into squatter settlements, is that likely as you said?
PB: I saw a figure earlier today that suggested 40 percent of the Port Moresby population lives in settlements, it's obvious the figure gets effected every time they build a new highway and knock down the existing housing settlements, but settlements can get re-established relatively quickly in some other location and the significant portion of the professional and technical and workforce of the city are actually living in those settlements so yeah sure if people can't afford a higher tax rate in housing that they're in then they'll either move out or they'll try and squeeze more but as I say many of those government houses that even senior staff are occupying, old government stock, are in little more than warehouses or shells anyway and un-maintained for donkey's years so even if they were valuable people would have a very good case to argue against being deemed to be in a high cost house when the floor is missing its floorboards and the roof is leaking and so on.
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