Photo: Greg Pawson
Following the government's Budget 2023 proposal to hike corporation tax from 30% to 45%, Kina Bank is abandoning all of its plans to grow by opening additional offices nationally.
Greg Pawson, the chief executive of Kina, stated that the bank was against any rise in corporate tax on the banking industry.
“To put into perspective, it is an additional tax of K40 million for Kina based on our 2023 forecast. That is a 50 per cent increase and K40 million that we will now be forced to not invest in future growth. The additional tax is a disincentive for us to invest and grow,” he said.
“The unintended consequences of such a move will be detrimental to the banking sector in Papua New Guinea (PNG) which is already structurally imbalanced,” Pawson added.
Pawson also announced the suspension of its small-to-medium business and home loan concession interest rate programs.
“We will be forced to reassess our capital expenditure programmes and likely cut investment,” he said.
“Crazy stuff and typical of recent policy developments, it will be the average Papua New Guineans who will be impacted.”
The first bank to respond adversely to Treasurer Ian Ling-Budget Stuckey's 2023 is Kina.
The tax hike is anticipated to cause commercial banks to boost interest rates and fees, making PNG the second-highest tax system in the world.
Ling-Stuckey announced the beginning of this tax during a business budget breakfast in Port Moresby.
“This is expected to raise K240 million (for the Government) to fund vital core services. We will consult the banking industry in the first half of next year, and consider if a different type of tax, such as an additional profits tax, may be more appropriate from 2024 onwards, while still raising the required revenues,” he said.
According to Ling-Stuckey, taxing banks was a good idea.
“Government needs to continue to raise revenue. We might introduce some new taxes to the sector (banking), that might in the best place to afford paying tax,” he said.
Reference: Esila, Peter. The National (1 December 2022). “Kina shelves expansion plans”.