New levy will harm member's retirement savings
The PNG Nambawan Super Limited (NSL) supports BSP’s statement that rejects the secretive new revenue measures included in the proposed Papua New Guinea 2022 Budget.
No consultations had been undertaken with any of the Authorised Super Funds (ASFs) or key stakeholders about this new K190 million ‘market concentration levy’, indexed to grow each year by 5%, on BSP as the major bank in PNG.
As a tax on profits, it is a tax on the shareholders and not BSP as a company. It is in fact K190m worth of dividends that the State will be taking away from shareholders.
Superannuation funds have provided the patient capital in BSP that enabled the bank to establish itself. Nambawan Super is one of the largest shareholders of BSP with a 12% stake in the business.
At this time, superannuation funds should be rewarded for helping establish a strong and successful bank in PNG, instead this unfair new levy will diminish dividend payments to shareholders and the share prices – which are based on dividends, will decline.
This is effectively an extra tax burden on hardworking tax payers who are already highly taxed throughout their working lives.
Nambawan Super members can expect to lose just under K23 million worth of dividend revenue as our 12% share of the K190 million burden from the State.
After considering BSP’s price to earnings ratio and the immediate capital losses, it is estimated that in the first year alone, the members’ crediting rate may be reduced by as much as 2% – which translates to about a K160 million loss of members’ returns.
This unfair, new levy singles out one bank creating unstable market forces and potentially creating an uneven playing field by setting up favorable conditions for competitors.
At a time when PNG needs to be encouraging favourable economic conditions to revive the Country these sorts of unexpected, unconsulted new levies further signal to foreign investors that the PNG business and investment environment is uncertain and risky.
In June this year BSP listed onto the Australian Stock Exchange (ASX) and in the three days following the announcement of this new levy, BSP’s ASX share price has dropped 8.4% as international investors become dissuaded by the new levy.
Another consideration is that BSP already meets significant tax and community service obligations. This levy may now force BSP to scale back on some of their market share to fall below the levy threshold of 50.1%.
If BSP is forced to do this, then it would mean a reduction in the availability of credit in the Country. This will result in a reduction of loans being extended to regular Papua New Guineans that are looking to start up a business or even purchase a home. This may also result in higher general banking fees to cover the cost of the huge levy.
From the outset of this decision by the State, the hard working every day members of the superannuation funds, are the losers. NSL agrees with BSP that this is unfair.
NSL does not set the State’s agenda however, we are the Trustee for more than 200,000 hardworking every day Papua New Guineans and it is important that the State understand their decisions’ impact on these people.
Transparent consultation is needed with the ASFs when making decisions on tax that could flow on to damage the retirement savings of those who are building the Country today.
This is a big, unfair levy imposed without consultation, and the ASFs of PNG want the State to be transparent, engage with us and the broader community, and answer who will ultimately pay for their new revenue measures – if not, the already hard working and highly taxed workers of PNG will be the ones to carry the burden.
This levy will not disable the services Nambawan Super provides to our members, but it will be felt by members. We will continue to pursue more investment opportunities for greater returns in the interest of securing the best retirement outcomes for our members, as we always have.
Statement
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