Parliament has formalized the redistribution of a portion of Goods and Services tax (GST) to city authorities in Papua New Guinea in a move aimed at ensuring that the authorities are better funded.
Law amended
The amendments to the Inter-government Relations Functions and Funds Amendment act tabled today by the Kokopo MP Ereman ToBaining Junior gives city authorities of Lae, Mt. Hagen and Kokopo the right to be paid 25 percent of all GST generated by their provinces.
“In future, when city authorities are created, similar provisions will be inserted in the law as is now for Lae, Kokopo and Mt. Hagen,” ToBaining said.
Since 2019, city authorities have been allocated portions of provincial GST under MOUs signed between the Internal Revenue Commission, the Provincial Governments and the authorities.
Lae city example
For Morobe, Lae City Authority has replaced the Lae City Council as the municipal authority with its with a large portion of its funding coming from GST.
Deputy Prime Minister and Lae MP, John Rosso, in a parliamentary address, commended the Inter-government relations minister, the governors for facilitating the changes in law.
“These arrangements, in no way take out money from our national government coffers,” The Deputy Prime Minister said. “It is an arrangement that is paid to our provinces already. We just take a portion of them and allocate it to the cities to ensure that they are run properly.
“In 2017, we moved forward with the City Authority concept in 2019. We now have only 94 staff running the city. Previously, we had 600 people doing nothing. We have now saved K7 million.
“We now collect our own internal revenue and now we have better roads, better streetlights, better schools better health services, because of what that original MOU designed and achieved between the Prime Minister, the three governors and the IRC Commissioner,” he added.
Past and present
Between 2002 and 2003, Morobe Governor, Luther Wenge, in a previous parliamentary term, successfully negotiated the retention of 60 percent of GST collected within the Morobe Province. This paved way for an additional arrangement with the Internal Revenue Commission and the Morobe Provincial Government nearly 20 years later for Lae City to be given 20 percent of Morobe’s GST.
The Western Highlands and East New Britain then followed suit with each city authority being given their own GST allocations.
Under this new legislation, city authorities will receive 25% of the provincial GST portion, which will significantly increase their funding. The redistribution of the GST is expected to provide city authorities with a more stable source of revenue, enabling them to invest in improving public services and infrastructure.
This move comes as a response to the growing needs and demands of urban centers in Papua New Guinea. As cities continue to experience rapid population growth and urbanization, the burden on city authorities to provide essential services has also increased. However, their existing funding sources have not been able to keep up with these demands.
By allocating 25% of the provincial GST portion to city authorities, the government aims to address this funding gap and ensure that urban areas receive adequate financial support. This will enable city authorities to meet the needs of their residents and improve the overall quality of urban life.
Additionally, this redistribution of GST will also promote decentralization and effective governance at the local level. City authorities will have more financial autonomy, allowing them to prioritize and address the specific needs of their respective cities.
Overall, this new legislation is expected to lead to significant improvements in urban infrastructure and services in Papua New Guinea. By providing city authorities with a more substantial funding source, the government aims to create better living conditions for residents and promote sustainable urban development in the country.