6 Ways to Quickly Improve the current Tax Regime for Entrepreneurship

Here are my recommendations in brief based on:

• 15 years of hands-on tax compliance experience in PNG
• Including 6 years working with highly-educated middle-class Wantoks who operate their own formal MSME
• Including 3 years of being a full-time bootstrapped start-up entreprenuer dealing with the tax/finance management issues of formal MSME's

Remove the flat 42% Salary or Wages Tax (SWT) for Entrepreneurs

Currently, the tax law requires you to be taxed at 42% flat if you have a SECOND EMPLOYER!

This punishes the most productive human resource in the country - the working (employed) middle-class!

This basically means, if you have a full-time career, and want to start up your own formal business, you'll have to apply a 42% SWT on any salary or wages you pay yourself from your own business since it's your SECOND EMPLOYER.

How discouraging this is for the "cream-of-the-crop" in the nation who have the heart, skills & even start-up capital to venture into entrepreneurship to help the government to solve the problems we see via private businesses.

This should not be too difficult for the government to administer.

Salary Sacrifice Policy Entrepreneurs

Currently, the salary sacrifice policy is better suited for larger businesses who can afford to offer an annual salary package to their employees.

It is not suited for Entrepreneurs who face cash-flow challenges at start-up and growth phase in our business ventures.

The government and its curated bodies who are set up to encourage entreprenuership in the country must look at a solution for this.

Start Up Tax Relief

There is currently NO general tax provision for START UP COSTS in PNG tax law.

Now that everyone wants to be an entreprenuer, it's time for the government to enact something they can quickly and efficiently administer to encourage & boost innovation in the local entrepreneurial space.

Quickly facilitate GST credits & refunds from K2,000 and below

Currently, it seems impossible for start-up & growth phase Entreprenuers registered for GST to use their GST credits & refunds to manage finances efficiently & effectively.

Again, there are unique cash-flow challenges in the start-up & growth phases in an entrepreneurial enterprise. I know coz I am going through this myself, and work with clients in the exact same boat.

There are 2 scenarios I've seen regarding GST:

1. Formal MSMES's who have voluntarily/mistakenly/ignorantly registered for GST
2. Formal MSME's who have exceeded the required GST registration threshold of K250,000 in 12 months turnover

The reality is that there is no guarantee that this level of sales/revenue can be sustained in the immediate future. Check this out:

• K250,000 divided by 12 months = K20,833.33 monthly turnover (sales)
• K20,833.33 divided by 11 = K1,893.94 (GST portion of the total monthly sales)
• Round monthly GST payable to K2,000

Surely, the government (the IRC) can efficiently administer a GST credits & refunds process for claims of K2,000 and below within the next month following a GST filing! C'mon!

Obliterate the annoying BIPT

The Business Income Payments Tax is an annoying tax to administer at all touch points. Get rid of it!

Tax Agent programme for MSME's

The current Tax Agent programme is suited for corporates. Big businesses have finance teams headed by experienced professionals etc etc.

ALSO

The current Tax Agent rules do not allow anyone other than a registered tax agent to prepare tax returns for taxpayers.

• But it's been a long, expensive, difficult process to get this practice license (from my personal experience)
• There are tax professionals who have the skills, experience & HEART to help SME's. However, point 1 above is the hurdle.
• Even if I do get it, I cannot bear the risk representing MSME's to the IRC if I do not handle their accounting.
• MSME's are basically not tax literate enough to invest in accounting & tax services.

Every well-educated, middle-class Wantok I have met who has not had the same or similar career as mine in tax, has NO IDEA where to start and go with taxes in their own business!

Tax Education is not something that is only lacking in the informal sector (grassroots / rural pop / a lesser-educated PNG'n).

It is a CORE BUSINESS CONCEPT that good-hearted, ethical citizens of this nation do not understsand.

Yet NIL PRIORITY has been put on TAX EDUCATION & TAX LITERACY in the current financial literacy programmes!

It is the BIGGEST EXPENSE IN MODERN LIFE...

but get this:

TAX LAW FAVOURS ENTREPRENEURSHIP!

Almost ALL BUSINESS EXPENSES ARE TAX DEDUCTIBLE!

ACCURATE ACCOUNTING is at the CORE of TAX LITERACY for personal wealth building via ENTREPRENUERSHIP

The government and all of its curated bodies that are supposed to support & boost the entreprenuerial ecosystem in the country have yet to put in place:

• A tax education curriculum for entrepreneurs to understand the most basic tax benefit of deductible business expenses
• A tax agent programme for experienced tax professionals (who are unregistered tax agents but have the skills, experience & heart) to assist MSME's in the start-up & growth phases of business
• A programme to upskill experienced accountants in SME accounting principles & PNG tax compliance principles, including tax strategy for entrepreneurship
• A mentorship program for inexperienced accountants to gain practical work experience with experienced accountants by doing the bookkeeping for MSME's
• A coaching program in collaboration with tax experts in local Big 4 firms to coach local entreprenuers cutting big deals with overseas investors, and building businesses to sell and/or to get to an IPO.

Please share this with someone you know who can make things like this happen from the top!

To end, I feel I need to clarify what I mean when I say ENTREPRENEURSHIP.

When you solve a problem so well for someone other than yourself, that they pay you over and over again. In that process, you end up making a profit for yourself.

How many problems do we have in PNG?