The effects of COVID-19 on impact revenue will continue until 2021.
According to the projections done in the 2021 Budget Paper Strategy (BPS) by the Department of Treasury, the loss in business income will still manifest in reduced corporate income tax earnings in 2021 as filings for 2020 assessable year become payable in 2021.
The document further predicted that reduction in corporate income taxes is therefore expected from earlier estimates. However, GST and international trade are estimated to recover with economic recovery. The document also stated that taxes and dividends from PNG LNG most probably will remain low given the project is still writing off depreciation costs and debt repayments after following an LNG price and modest oil estimate.
These revenues are expected to be around K12.9billilon in 2021.
The BPS suggests several priority actions to raise revenue further next year - the approval and implementation of the revised SOE dividend policy that enhances the flow of funds of SOE earnings to the budget; and the passing, correction, and implementation of the PMMR Act which was deemed unconstitutional by the Supreme Court.
The Department of Finance is presently revising the draft legislation expected to be passed by Parliament soon. The outlook is that only 25 per cent of the annual projection of PMMR revenues is part of the revenue estimates for 2021.
It is predicted that recovery in GST and trade taxes is likely to stagger over the next year (as compared with an abrupt increase). Meanwhile, the non-resource recovery projected in 2021 is mostly GST. Risks to fiscal outlook are further infection periods and deterioration in the global economy.
