The AusAID reality – can’t do, won’t listen
Coming to terms with ‘capacity’ constraints

PNG must reform tax to leverage resources


A EUROPEAN Union-funded geological survey has apparently revealed potentially large mineral deposits in the PNG Highlands: copper, gold, silver, zinc, chromium and nickel.

"The mineral potential is very high based on the results we have so far," chief geologist Dr John Aspden said. "Eight mining companies, including Barrick, BHP and Rio Tinto have bought the data which is strategic information needed to mine the resources."

Earlier this year, geologist Jerry Barry claimed the Ramu Nickel mine to be worth more like $US34 billion and not the $US1.7 billion the mine's 85% ownership was sold to foreign owners by the PNG government.

In February the website Ramu Mine Watch claimed the Lihir gold mine profited by US$500 million in one year alone yet paid no taxes to PNG.

"The Ramu Nickel operation which is owned and operated by the Chinese will dwarf the Lihir gold mining operation in its size but all the signs are that it will be an even bigger financial disaster for PNG", the article asserted.

There’s a feeling globally that resources companies are not paying their way in the developing world and that, if they paid their fair share of tax, the countries concerned would be able to reduce their dependence on aid.

Former Goldman Sachs economist and author of the best-selling book Dead Aid, Dambisa Moyo, has argued that foreign aid is not only ineffective in promoting development, it is an impediment.

She says that foreign aid displaces domestic revenue from taxation-and does so with terrible results.

"Foreign aid programs, which tend to lack accountability and checks and balances, act as substitutes for tax revenues," she writes. "The tax receipts this releases are then diverted to unproductive and often wasteful purposes rather than productive public expenditure (education, health infrastructure) for which they were ostensibly intended."

The breakdown of the tax system can have serious political ramifications, as "the absence of taxation leads to a breakdown in natural checks and balances between the government and its people."

So where does this leave the people of PNG and their taxation system?

Sadly lacking for want of government scrutiny and at the apparent mercy of the impact of overseas aid, one can conclude.


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