High Taxes Have A Negative Impact on Savings

by PNG Business News - September 13, 2021

According to Nambawan Super Ltd, the 6% of wages that people must put to superannuation after income tax is too excessive.

Chief Executive Officer Paul Sayer said the majority of members will pay at least 22% income tax on their employee contributions.

He claimed it was unjust since some members would pay up to 42 per cent of their gross revenue in taxes before making the 6% employee contribution.

“Note that this tax is paid before the contribution is made to super,” Sayer said.

“Furthermore, the Internal Revenue Commission has taken steps to prevent members from simply salary sacrificing before-tax income into super, despite many organisations facilitating salary sacrifice for many other costs, like education and subscriptions, and it being legal for employers to pay up to 15 per cent super for employees before tax.

“This ruling is forcing members to negotiate new contracts, which makes it very hard for everyday Papua New Guineans to put a good savings practice in place for their future.

“Nambawan Super would like to see salary sacrifice available to all members to top up their employer contribution from 8.4 per cent up to as high as 15 per cent of their base salary.

“Nambawan Super would like to see earnings taxed less, as this will mean better returns for members, who typically are investing into PNG businesses who already have paid tax on their earnings before the Fund pays taxes on those earnings within the Fund.

“Through the Bank of PNG superannuation review, Nambawan Super will look to provide feedback on tax at all points for Fund members.”

 

Reference: Dale, Luma. The National (p Septeber 2021). “High taxes affecting savings”. 



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