Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698056464769.pdf (Papua New Guinea)
FIFTH DAY ________________________ Tuesday 13 November 2018 DRAFT HANSARD _________________________ Subject: Page No.
: BROADCASTING OF PARLIAMENTARY PROCEEDINGS – STATEMENT BY THE SPEAKER ................................. 2 MOTION BY LEAVE ................................................................................................................................................................... 2 SUSPENSION OF STANDING ORDERS –REARRANGEMENT OF BUSINESS................................................................. 2 Message from the Governor-General ........................................................................................................................................... 3 APPROPRIATION (GENERAL PUBLIC SERVICE 2019, BILL 2018, APPROPRIATION (JUDICIARY SERVICES 2019) , BILL 2018, APPROPRIATION (NATIONAL PARLIAMENT 2019), BILL 2018 ...................................................................................... 3 First Reading .............................................................................................................................................................................. 3 Second Reading .......................................................................................................................................................................... 3 CUSTOMS TARIFF (2019 BUDGET AMENDMENT) BILL 2018 ........................................................................................ 23 First Reading ............................................................................................................................................................................ 23 Second Reading ........................................................................................................................................................................ 23 GOODS AND SERVICES TAX (2019 BUDGET) (AMENDMENT) BILL 2018 ................................................................... 24 First Reading ............................................................................................................................................................................ 24 Second Reading ........................................................................................................................................................................ 25 INCOME TAX (2019 BUDGET) (AMENDMENT) BILL 2018 ............................................................................................... 25 First Reading ............................................................................................................................................................................ 25 Second Reading ........................................................................................................................................................................ 25 INCOME TAX (INTERNATIONAL AGREEMENTS) (2019 BUDGET) (AMENDMENT) BILL 2018 ............................. 26 First Reading ............................................................................................................................................................................ 26 Second Reading ............................................................................................................................................................................ INCOME TAX (SALARY OR WAGES) (RATES) (2019 BUDGET) (AMENDMENT) BILL 2018 .................................... 27 First Reading ............................................................................................................................................................................ 27 Second Reading ........................................................................................................................................................................ 27 INCOME TAX, DIVIDEND (WITHHOLDING) TAX AND INTEREST (WITHHOLDING) TAX RATES (2019 BUDGET) (AMENDMENT) BILL 2018.......................................................................................................................... 28 First Reading ............................................................................................................................................................................ 28 Second Reading ........................................................................................................................................................................ 28 MOTION BY LEAVE ................................................................................................................................................................. 29 SUSPENSION OF STANDING ORDERS –REARRANGEMENT OF BUSINESS............................................................... 29 SUPPLEMENTARY APPROPRIATION BILL 2018 .............................................................................................................. 29 First Reading ............................................................................................................................................................................ 29 Second Reading ........................................................................................................................................................................ 29 Message from the Governor-General ......................................................................................................................................... 30 Third Reading ........................................................................................................................................................................... 30 MOTION BY LEAVE ................................................................................................................................................................. 30 SPECIAL ADJOURNMENT ...................................................................................................................................................... 31 ADJOURNMENT ........................................................................................................................................................................ 31 FIFTH DAY Tuesday 13 November 2018 The Speaker, (Mr Job Pomat) took the Chair at 2 p.m.
There being no quorum, present, Mr Speaker stated that he would resume the Chair after the ringing of the Bells.

Sitting suspended.

The Speaker, again took the Chair at 2.55 p.m., and invited the Member for Kompiam- Ambum; Minister for Environment and Conservation and Climate Change; Honourable John Pundari to say Prayers: ‘We come together before your throne oh dear Lord; and we come just as we are.

We come in our sinfulness, we come that you may have mercy on us.
And we thank you for the privilege of being servants of your people.

And as we bow our heads and stand before you; we represent our people and our country.

We repent from not only our sins but the sins of our people and our country.

We pray that the abundance of your forgiving grace in the Name of our Lord Jesus Christ will cover this nation and our lives.

We thank you for a wonderful and beautiful country that you have blessed us with.
Dear Lord as we stand here, with our heads bowed before you; we pray and ask that you will keep us humbled.

Forgive us Lord of our pride, our pretences and our hypocrisy.

Forgive us for hurting others, for disobediences towards your word and your commands.

O Lord have Mercy on us and guide us today with wisdom, understanding and may the power of your spirit guide and lead our minds as we deliberate on the Budget today.
Lord we thank you that we are in the APEC week and we thank you so much that the power of the presence of your angels will be in this country to protect and guide everyone with wisdom and understanding.

And that in our humility, while we have this great meeting here; O Lord may it all be to the glory and honour of your name, as we play host to great leaders of the world.

May you unite us as one, so we put aside our differences and may you lead us and help us to follow you.
And may this country bring you honour and glory that you deserve so much; we say this prayer through the mighty name of Jesus; Amen.’ 1 BROADCASTING OF PARLIAMENTARY PROCEEDINGS – STATEMENT BY THE SPEAKER Mr SPEAKER – Honourable Members, I have to inform Parliament that the Permanent Parliamentary Committee on broadcasting of Parliamentary proceedings met today and resolved that; (a) The National Broadcasting Corporation Television and Radio will be allowed to broadcast live.
(b) Also, EMTV, TV WAN and Click TV will be allowed to broadcast live the presentation of the 2019 National Budget by the Deputy Prime Minister and Minister for Treasury at 2 O’clock this afternoon for news purposes.

02/05 MOTION BY LEAVE Mr JAMES MARAPE (Tari – Minister for Finance and Rural Development) – I ask leave of Parliament to move a motion without notice.

Leave granted.
SUSPENSION OF STANDING ORDERS – REARRANGEMENT OF BUSINESS Motion (by Mr James Marape) agreed to – That so much of the Standing Orders be suspended as would prevent: (a) The Deputy Prime Minister and Minister for Treasury presenting the 2019 National Budget and associated budget papers (b) The Appropriation (General Public Expenditure 2019), Bill 2018, an Appropriation (Judiciary Services 2019), Bill 2018, an Appropriation (National Parliament 2019), Bill 2018 being presented together and debated as one.
(c) Separate questions being put on the Second and Third Readings.

2 Message from the Governor-General A message from his Excellency, the Governor General dated 13 November 2018; (a) A message recommending the expenditure of public monies of PNG in accordance with Section 210 of the Constitution insofar as the Appropriation (General Public Service 2019), Bill 2018 relates to and provides for such expenditure.
(b) A message recommending the expenditure of public monies of PNG in accordance with Section 210 of the Constitution insofar as the Appropriation (Judiciary Services 2019), Bill 2018 relates to and provides for such expenditure.

(c) A message recommending the expenditure of public monies of PNG in accordance with Section 210 of the Constitution insofar as the Appropriation (National Parliament 2019), Bill 2018 relates to and provides for such expenditure.
APPROPRIATION (GENERAL PUBLIC SERVICE 2019, BILL 2018 APPROPRIATION (JUDICIARY SERVICES 2019), BILL 2018 APPROPRIATION (NATIONAL PARLIAMENT 2019), BILL 2018 First Reading Bills presented by Mr Charles Abel and read a first time.

03/05 Second Reading Leave granted to move the second reading forthwith.
Mr CHARLES ABEL (Deputy Prime Minister – Minister for Treasury) - Mr Speaker, Honourable Members, my fellow citizens of this great nation, on behalf of the O'Neill-Abel Government, I am pleased to present the 2019 National Budget under the theme: "Building A Broader Based Economy".

Mr Speaker, firstly, our development journey continues to be guided by the groundwork laid particularly since 2011-2012 under the leadership of Prime Minister, Hon.

Peter O'Neill and the coalition agreement, Alotau Accord I.
3 Since returning to power in 2017 under Alotau Accord II, the new coalition Government responded to some difficult circumstances through the 100 Day/25 Point Plan to: "ENSURE SOUND MACROECONOMIC AND FISCAL MANAGEMENT, RESTORE CONFIDENCE AND GENERATE INVESTMENT by - MAINTAINING FISCAL DISCIPLINE, BOOSTING FOREIGN EXCHANGE, GROWING REVENUES, STRENGTHENING OUR ECONOMIC BASE, IMPROVING GOVERNANCE AND ACTING STRATEGICALLY.
The 25 Point Plan commenced with the 2017 Supplementary Budget which necessitated significant cuts to the capital budget to maintain the fiscal deficit and debt parameters of the 2017 Budget proper.
Mr Speaker, the 2018 Budget, continued the reforms and I am delighted to report that we are continuing to make considerable progress as we implement the reforms of this Government Mr Speaker, we have been confronted with many obstacles since I brought down the 2018 Budget last year, particularly the devastating earthquake that tragically claimed so many lives, took away the livelihoods of families and communities, severely disrupted business and industry, and threatened a deep economic downturn.
There was also the Kadovar volcano eruption and more recently the Manam volcano.

So much so that the country's credit rating was downgraded as a result.

Mr Speaker, in the face of those adversities, including the polio outbreak, we rallied together as a nation in support of the people affected, to minimise the broader impacts and stay focused on our path to recovery.

The performance of the 2018 Budget in the light of these circumstances has been quite remarkable, Mr Speaker.
We have increased revenues under the Medium Term Revenue Strategy.

We have improved fiscal discipline under the Medium Term Fiscal Strategy.

And, we have restructured our debt under more favourable terms under the Medium Term Debt Strategy, maintaining this Government's commitment to a declining fiscal deficit and keeping debt within sustainable limits.

The reform strategies of this Government are working, Mr Speaker, and they have provided renewed confidence in our economy.
A key measure of this confidence are some examples of the investment decisions of our private sector over the last year, which included: The NBPOL acquisition of the long underperforming Markham Farms for USD $50 million, which with additional capital investment from 2019 is set to commence exports in coconut products, palm oil and other agricultural commodities; Over a dozen new small to medium local manufacturers opening for business; 4 A number of well-established local manufacturers, including Coca Cola Amatil (PNG), Pacific Industries, Lae Biscuits, Mainland Holdings, Trukai, Innovative Agro Industries, commence major re-capitalisation and investment projects, with a combined investment value of more than K1.5 billion.
Prior to 2018, a number of these businesses had been reconsidering Papua New Guinea as a place to do business; The legacy investment in the banking and finance sector with the home grown Kina Bank buy out of ANZ's retail, commercial and SME businesses; The opening of the Star Mountain Hilton Hotel serving as a significant boost to the hospitality and tourism sector; and Port Moresby residents enjoying access to locally manufactured fresh dairy products for the first time, something that will extend to residents of Lae and Morobe in 2019.
Mr Speaker, it is critical that focus and discipline is maintained towards our strategy so that we are building that broader based, more resilient economy to protect our people and economy from economic and weather or geophysical shocks.
04/05 Together, these measures provide for sound macroeconomic and fiscal management, to keep building confidence in our economy, increase and diversify investment, replace imports, boost exports and reduce reliance on debt, in order to deliver better social services, infrastructure and employment and business opportunities for the people of Papua New Guinea.
All of which are consistent with the aspirations of our people as articulated through the National Planning Framework, including Vision 2050, StaRS and the Medium Term Development Plan III (2018 - 2022).

Importantly, Mr Speaker, this Government's reform agenda has led to unprecedented success in achieving our ambitious international financing plan.

Raising US$500 million through the inaugural 10-year sovereign bond issue was a significant milestone for our country.
In difficult international circumstances, the bond was oversubscribed by as much as seven times, demonstrating very strong interest and investor confidence in our economy and the Government's fiscal and financial management.

Strategically, the country's first ever bond issue coincided with the enormous boost to our global profile that has come from the investment we have made in hosting the APEC Leaders' Summit.
Other achievements in 2018 included the mobilisation of non-tax revenue through the enactment of the Public Monies Management Regularisation (PMMR) Act 2017 which resulted 5 in the transfer of significant funds to the Consolidated Revenue Fund to support the Government's budget.

Mr Speaker, as we look to 2019 and beyond, this year has shown how substantial progress can be made even in the face of adversity.
The progress highlighted above demonstrates that the O'Neill-Abel Government's approach towards implementing the Alotau Accord II has balanced the level of ambition against the need for fiscal responsibility, by ensuring we spend wisely and within our means.

Critically, our strategies seek to ultimately get the country to a position where we can fully fund our recurrent costs, significantly expand our capital budgets and generate savings for future generations through a Sovereign Wealth Fund.
Mr Speaker, the historic APEC event is culminating this week with the Economic Leaders Meeting, chaired by our Prime Minister.

The Chinese President is visiting us for two days.

Our Pacific leaders will be here as well.

This is an unprecedented moment for our country to gain visibility and create trade and investment opportunities because that is what APEC is all about.
It has also brought us legacy infrastructure, training and confidence to host other events in the future in the same manner as the Pacific Games did.

APEC will resonate through the 2018, 2019 budgets and beyond.

With those introductory remarks, Mr Speaker, I will now update the House on the state of the economy before discussing the 2018 Supplementary Budget and the coming year's Budget – the 2019 Budget.
State of the Economy Mr Speaker, the global economy is enduring new challenges especially with international relations becoming more delicate in 2018 predominantly due to trade tensions between some of our larger friends.

This has affected our key commodity prices and the volatility has added to risk.
The global economy is still projected to grow, in real terms, at 3.7 per cent in 2019 - not much lower than previously, but risks are tending to mount and this is affecting emerging market economies such as Papua New Guinea.

Prices of PNG's major commodity exports are expected to be mixed in 2019 reflecting global economic and market-specific conditions.
Oil, gas and palm oil prices are projected to average around same levels as 2018, while copper, gold, coffee, cocoa and copra oil prices are expected to be slightly lower.

Mr Speaker, in terms of domestic growth, in 2018, the economy is expected to grow at 0.3 per cent, lower than the 1.0 per cent projected at MYEFO and the 2.4 per cent projected at the time of the 2018 Budget.
Whilst in 2018, the agriculture, forestry and fishery sector is 6 expected to expand by 3.3 per cent in real terms, oil and gas sector production is expected to contract by 9.4 per cent predominantly due to the negative impact of the earthquake in February 2018 and the subsequent shut down for 7 weeks.

Despite the quick re-start of production soon after and at rates above pre-earthquake levels, the impact was somewhat deeper than expected.
05/05 Revenues though have been positively impacted due to above budget oil and gas prices and more vigilance in monitoring and pursuing related taxation and dividend flows.

Mr Speaker, the APEC event has provided a stimulus to the domestic economy, however there also continues to be adverse effects of fiscal tightness, government arrears and the shortage of foreign exchange.

Mr Speaker, creating quality jobs for our people remains a priority for our Government.
The Bank of Papua New Guineas' total employment numbers appear to show signs of a gradual recovery in 2018 with the index increasing by 1.6 per cent over the year to mid-2018.

We believe the measures taken in the 2017 Supplementary Budget and the 2018 Budget to encourage import substitution, support local manufacturing and to provide a level playing field for domestic industry impacted by foreign market subsidies had a quick impact on local investment and employment in the value added sectors.
This year local manufacturers commenced more than one billion kina in capital investment and expansion, and reported increases in output between 10 and 30 per cent.

Mr Speaker, changes in the application of subsidies for the fishing sector has seen significant increases in domestic production, with the largest operators having added an additional shift (equivalent to more than 15 000 additional paid hours per week).
Mr Speaker, advice from the manufacturing sector is that they anticipate employment growth of 15 per cent in 2018 with further growth in 2019-2020 and this will also drive investment and employment growth in the service sector.
Mr Speaker, this shows our Government's Policies are working and this employment growth in domestic value-added industries and local manufacturing are the early results of our plan to build a broad based economy, and more importantly this growth has not been confined to the large multinationals operating in PNG with small, medium and large local manufacturers also investing and expanding.
Mr Speaker, in the 2019 Budget, a number of measures have been announced that will accelerate broad-based private sector investment, activity and formal employment levels particularly in the non-mining sector.
7 Mr Speaker, these comprise: the Government's policy to solve the foreign exchange imbalance; its plan to make substantial inroads into the arrears outstanding; the substantial adjustments to tariffs and excises which will further assist our manufacturing sector; the domestic debt retirement program that should improve the prospects for private sector credit; the pro-development infrastructure program including the SOE reforms planned; the full execution of the operational and capital budgets from the beginning of the fiscal year given the securing of financing; the kick starting of the large mining and petroleum projects in 2019; and the expected positive announcements from the APEC Summit, particularly in terms of direct support for PNG infrastructure development.
Mr Speaker, inflation in 2018 is now projected at 5.6 per cent, lower than the 5.9 per cent projected in the MYEFO and the 6.9 per cent in the 2018 Budget.

The downward revision is due to lower quarterly outcomes of the consumer price index reported by the National Statistics Office and lower import inflation from our major trading partner – Australia.
The upward pressure on general prices from the depreciation in Kina against the US Dollar, rising oil prices and increased import tariffs on certain food and beverages announced in the 2018 Budget had only a modest effect.

Mr Speaker, let me now turn to our expectations for the coming year.

In 2019, the PNG economy is expected to pick up, reaching a real GDP growth rate of four per cent.
This reflects more buoyant domestic conditions fuelled by the recovery in the oil and gas sector and by the early works and services from large new mining and petroleum projects.
It also reflects the positive impetus expected from the 2018 Budget where the foreign exchange imbalance is expected to be largely extinguished, where significant arrears payments are programmed to be made, and where the operational and capital budgets are expected to be executed as scheduled in 2019, given the securing of the budget's financing requirements, and the revenue targets being met.

Mr Speaker, the medium term outlook for PNG is now much more optimistic than earlier estimates.
Between 2018 and 2024, the economy is expected to grow at an average annual compound rate of five per cent buoyed by the new projects in both the mining and petroleum sector and the non-resource sector.

Mr Speaker, the cost of basic goods and services which Papua New Guineans rely on is expected to continue to increase at a moderate rate of 5.4 per cent in 2019.
To provide some relief to our people from the price pressures, the 2019 Budget will reduce the tax threshold for low to lower and middle income earners, while the recent appreciation of the Kina against the Australian Dollar should see some easing in prices of goods and services from Australia.

8 06/05 2018 Supplementary Budget While the recent appreciation of the Kina against the Australian Dollar should see some easing price of goods and services from Australia.
Mr Speaker the correction in there 2019 Budget will increase the zero tax per-sold, for the lower to lower income earners giving the tax relief which I will explain further later in the speech.

In terms of supplementary budget, Mr Speaker for 2018 having in mind the update on the spate of the economy, I would like to introduce the 2018 Supplementary Budget and explain why it has been necessary.
Mr Speaker the 2018 Budget was the first budget in the new medium term fiscal strategy 2018 to 2022 which sure to address the number of long running fiscal challenges.

The government made strong and fiscal and financing commitments in 2018 that fiscal discipline was to be maintained such that fiscal deficits would decline as a proposition of GDP over the term of the plan, resulting in the debt to GDP ratio declining to 30 per cent by 2022.
This was to be achieved Mr Speaker, through lifting revenue trend and pulling back expenditure trend.
Importantly, within this declining expenditure trend, there was to be a compositional sheet within rising operational spending and towards more development spending at the decentralized level and to stop the intractable financing and exchange right constraint, a coherent and well-designed medium term depth strategy 2018–2022 was formulated that would seek to fund the fiscal deficit and fix the exchange rate imbalance through a significant ship and mix up financing towards some external loans and this was to achieve without having significant deficit service course at the fiscal program.
Overall, Mr Speaker, in 2018 substantial progress was made in achieving the ambitious goals target presented in the three medium term plan carrying fiscal revenue and depth strategy.

The government was able to fund its expenditure priority and although the expenditure label is expected to be above budgeted level, increase revenue mobilization has meant the fiscal deficit in 2018 at 1.897 billion is expected to be lower than program in 2018 Budget.
With nominal GDP rising more than budgeted, this meant that the debt to ratio GDP is likely to end the year at 30.9 per cent well within the target, 30 per cent to 35 per cent band, and on the way to achieving the 30 per cent fiscal responsibilities act target by 2022.

Mr Speaker, our ambitious financing plan has subjected our economic management to intense scrutinizing from the likes of the Asian Development Bank, the World Bank, International Banking Syndicate and Global Financial Market.
We have work closely with the 9 International Monitory Fund, these has helped us to understand our own economy better, refine our strategy and present Papua New Guinea to the world at the positive light.
Mr Speaker, the injection of the international financing from the sovereign bond issue as been couple with break through access to direct budget support through facilities provided for the first by the Asian Development Bank at $US 300 million over three years and for the first time nearly, 20 years by the world bank for $US 300 million as well.

Additionally the government has in discussion with the large commercial bank for the low cost budget support of $US300 million to support the 2019 Budget.
This new external financing measures, Mr Speaker, exemplify the growing confidence in and respect for a current support for fiscal discipline and robustness of our system.

These are being successfully treasured through the acute international scrutiny than came through engaging its processes and program.
Mr Speaker, our government welcomes such test, as a not only highlight advance that have been made in recent years, but also serves to ensure that we are continually improving as we depend on our relationship with more bilateral partners in this way, we will better place to fully align these partnerships national vision and priorities as well.
The importantly Mr Speaker, the process from these external financing stream will be used to fund the commitments of the 2018 Budget, and the finance requirements of the 2019 operational and the development budget, break the reliant on the expensive short term domestic depth, take pressure off domestic interest rates and extinguish between foreign exchange imbalance.
Mr Speaker, already, the 2018 drawdown have help ease the delay in for filling the orders for foreign exchange, but we will not rest until balance has restored so that our businesses can trade and invest without hindrance and unnecessary risk.
Mr Speaker the dominant force impacting the 2018 outturn have been a significant increase in mining and petroleum factors and dividend on one hand, and on the other hand significant pressures have come in from rising government payroll cost which, to be frank, we have struggled to control.

Mr Speaker, during the past 4 years there has been an escalating trend in a number of agencies exceeding their PE ceilings by significant margins.
07/05 Mr Speaker, several issues have contributed to the successive blowouts.

There has been some under-budgeting reflecting industrial awards and superannuation benefits that the Government had not budgeted for.

There was a lack of control in the system in terms of funds 10 checking against warrants, and there was little control over the intake from teachers, health workers, Police and Defence.

The Government has sought to gain greater control by forcing some savings through recruitment freezes.
Agency amalgamations, agency abolishment, staff right-sizing, but these have not materialised to the extent expected.

New measures have been announced in this 2019 Budget to regain control over this important expenditure category.

Mr Speaker, to maintain overall fiscal control, the Government has issued instructions to tighten up expenditures over the remaining two months of 2018 and allow unused warrants to lapse, and we will engineer a hard close to the accounts at year end.
Mr Speaker, the expected 2018 fiscal deficit estimated at K1 897.2 million – being 2.3 per cent of GDP is lower than anticipated, with the debt to GDP ratio now expected to end the year at 30.9 per cent.

This is well within the 30.0 to 35.0 per cent range prescribed by the Fiscal Responsibility Act (Amended 2017), and the 25PP and FRA target of being capped at 30.0 per cent by 2022.

Mr Speaker, the improvement in revenue performance since 2016 has been significant.
The reforms under the Medium Term Revenue Strategy 2018-2022 underpinning this turnaround will continue.

Non grant revenue for 2018 is expected to exceed what was forecast in the budget and come in at K2.603 billion above the outturn for 2016.

The revised estimate for total revenue and grants for 2018 is K13 400.3 million against the budget estimate of K12 731 million, which represents approximately 15. per cent of GDP up from 13.0 per cent in 2016.
Importantly the revenue increases are due to growth in both mineral and non-mineral receipts, for 2018.

Mr Speaker, despite the impacts of the earthquake, revenue targets are largely on track and we are projecting a net additional K671.0 million in revenue.

This includes gains of K546 million from Mining and Petroleum Tax and K400 million from additional dividend payments from Kumul Petroleum Holding Limited for 2018, against some declines in other revenue heads.
However, Mr Speaker, an increase in expenditure of K948.1 million is also expected, of which the unbudgeted increase in Personnel Emoluments is estimated to be K400 million which includes the unbudgeted payment of the 3 per cent pay rise granted to our public servants for 2017 and 2018, K146.1 million in additional to budget Nambawan Super Limited (NSL) exit payment arrears - which brings us back up to date with our current obligations.
The above budget increase in goods and services is estimated to be K310 million which includes provision for additional arrears payments for works, medicine, utilities, rental and others.

11 There is also an increase sought for interest payments of K72 million and for TFF for K20 million.

These increases are expected to be offset by reductions in the PNG Government funded capital budget of K277 million and the gain in revenue of K671 million.
Consequently, despite the expected decline in the fiscal deficit, a Supplementary Budget will still need to be submitted to cater for the over expenditures in these particular categories.

The Supplementary Bill is provided in the attached documents.
The total expenditure increase of K948.1 million will be funded by the projected revenue increase of K671.0 million and the expenditure savings of K277.0 million from the reallocation of capital from the PIP budget, thereby maintaining the 2018 Budget Deficit fiscal anchor.
Therefore, Mr Speaker, despite the more than offsetting increase in revenue in 2018 which resulted in a lower fiscal deficit of K90.0 million these higher respective expenditures and reductions to capital expenditures will require a Supplementary Budget.

08/05 2019 Budget Mr Speaker and honourable members, a Supplementary Budget for the 2018 fiscal year is required and will accompany the 2019 Budget.
Mr Speaker, I now present the 2019 Budget, with a fitting theme of "Building A Broader Based Economy" as we aspire to continue the momentum of 2018.

Mr Speaker, as I have noted, the 2019 Budget is framed against a moderately strengthening world economic environment with a reasonable commodity price outlook, but with a more positive outlook for the PNG economy now projected to reach a real GDP growth rate of four per cent.
Mr Speaker, 2019 will mark the second year for implementation of the Medium Term Revenue Strategy (MTRS).

And we plan to continue to lift revenue trends — excluding grants – to 15.0 percent of GDP in 2019, and to lower the expenditure trends from the 18.6 per cent in 2018 to 18.2 per cent in 2019 and to just under 16 per cent by 2022 - 23.

This will result in maintaining the declining fiscal deficit to GDP trend and ensure we maintain our 30 per cent debt to GDP target and below.
2019 Revenues Mr Speaker, the 2019 total revenue and grants is projected at K14 266.8 million, an increase of K866.5 million or 6.5 per cent compared to the estimated 2018 outturns.

This projection comprises K10 784.5 million in tax revenue and K2 539.2 million in other revenue 12 and K943.1 million in donor grants.

Tax revenue is expected to increase by K465.5 million, while non-tax revenue is expected to be K482.5 million higher than the estimated 2018 outturns.
Revenues from major tax heads are projected to increase above 2018 levels, except for Personal Income Tax which is projected to be lower.

Company Income Tax is projected to reach K2.5 billion, Mining & Petroleum Tax K856 million, dividend Withholding Tax K149 million, Interest Withholding Tax K116 million, Gaming Machine Tax K197 million, GST is expected to reach K2.2 billion, Excise Duty K923 million, Export Tax K405 million, Import Duty K358million and Import Excise K322 million.
The lower Personal Income Tax projection of K2.9 billion reflects the Government's policy to lower the effective tax on low income earners by lifting the two lowest thresholds, being the tax free threshold from K10 000 to K12 500 and the 22 per cent tax threshold from K18 000 to K20 000.

Mr Speaker, non-tax revenues are expected to remain high in 2019 and above the 2018 levels by K119.9 million.
This is comprised of K1 205.0 million in dividends from State- owned Enterprises (SOEs), K750.6 million in Statutory Transfers from Statutory Authorities and K156.0 million in Fees & Charges.

The SOE dividends are expected to increase, with the bulk of the contribution being from Kumul Petroleum Limited (KPHL).
One of the measures to strengthen non-tax revenues in 2019 is the implementation of the Dividend Policy of which mining and petroleum State-owned Enterprises will be required to pay a minimum of 50 per cent of their net profit after tax as dividend to the Consolidated Revenue Fund (CRF).

In line with the Dividend Policy, Kumul Petroleum Limited is expected to pay K800.0 million in 2019 which reflects an oil price at USD67.7 per barrel, and a normal year's gas production.
Ok Tedi Mining Limited is expected to pay K200.0 million.

Kumul Consolidated Holdings Limited and Motor Vehicle Insurance Limited are expected to pay K80.0 million and K25.0 million, respectively, and the Bank of Papua New Guinea is expected to pay K100 million.

In addition, revenues from the other statutory bodies through fees and charges and license fees are expected to increase, with bulk from the National Fisheries Authority.
With the implementation of the PMMR, the sweeping of excess cash balances from respective trust accounts and operating accounts of the statutory agencies was completed in 2018.

13 09/05 It is estimated that up to K750.6 million is expected from this revenue stream for 2019, and the amount is expected to settle around this level over the medium term.
Mr Speaker, revenues from departmental fees and charges are also expected to increase, of which K58 million is expected from the Department of Labour and Industry, K52 million from the Department of Lands and K46 million from other departments.
Mr Speaker, I wish to bring to the attention of the House that collection of land rentals by the Department of Lands has been very weak over the past years, including this year with significant outstanding arrears to be collected as a result of the problems in the LAGIS system.

In the 2019 Budget, the Department of Lands has been allocated a total of K4.7 million to address this problem and lift revenues from land rentals.
Mr Speaker, our development partners will support us with a total grant of K943.1 million.

We must note that donor grants are subjected to movements in exchange rates and policies of donors.

We continue to receive major grant support from Australia through DFAT.

Next year, they are supporting us with a total aid in grant of K711 million.

Mr Speaker, it is also worth noting that our development partners have been very supportive in the hosting of APEC.
This year, we have received grants in-kind of more than K100 million.

There was also additional support for military exercises, training and capacity building to shore up security Taxation Measures Mr Speaker, consistent with the medium term revenue strategy, the 2019 Budget introduces a number of new revenue policy measures.
These measures support our efforts toward fiscal consolidation, as well as the need for continued investment in key expenditure priorities such as education, health, infrastructure, and law & order and to ensure the sustained delivery of essential goods and services.

Most importantly, the measures ensure an equitable burden is shared among our tax payers whilst raising sufficient revenue to ensure the Budget remains on track.
Mr Speaker, I would like to inform the Honourable Members on the success of the tax policy amendments initiated in the 2017 Supplementary and 2018 Budgets.

These tax policies have boosted tax revenues this year from the mining 14 and petroleum tax, additional profits tax, interest withholding tax and gaming machine tax and will continue to deliver higher revenues in 2019.
Mr Speaker, building on these successes, I now present to the Honourable Members the major revenue reforms and measures for the 2019 year: (1) Strengthening Revenue Raising Agencies Mr Speaker, the IRC and PNG Customs have started implementing administrative reforms consistent with the Medium Term Revenue Strategy in 2018.

IRC launched the large tax payers’ office in September and has signed MOUs on tax collection assistance with provincial governments.
In 2019, Mr Speaker, the Government focus is to continue to strengthen revenue administration at the IRC and Customs, through the establishment of the Program Management Office to oversee implementation of the MTRS programs, establishment of a designated taxpayer service unit responsible for educational awareness on tax laws and the operationalisation of the large taxpayer office.
The strengthening of revenue administration has started to bear fruit, with the total number of taxpayer registrations 27 per cent higher in 2018, including a 14 per cent lift in company registrations.

Customs will begin the implementation of the Customs Service Plan focusing on increase compliance and enhanced revenue collections.
(2) Removal of GST zero rated status for Suppliers to Resource Companies The GST zero rating status for companies which supply goods and services to resources companies will be removed.

Under current practice, suppliers do not levy GST on supplies to resource companies but can claim GST refunds on inputs.

This in itself is presenting administrative complexity for both the taxpayers – suppliers and the IRC.
This arrangement can disadvantage IRC if the supplier chooses to misreport the composition of goods supplied at the zero rate and goods supplied at the 10 per cent rate to non-resource companies, therein lifting the refund amount claimed for input credits.

This should not impact resource companies as they will then be able to claim a refund of GST paid on inputs.

This measure aims to address related fraud and to improve tax administration and is expected to raise K86 million in 2019.
15 10/05 (3) Reform to Excise Tariff on Alcohol, Tobacco and Luxury Goods Mr Speaker, The indexation excise rate on alcohol has been suspended for 18 months meaning that excise rates will be maintained at the 1st June 2018 levels and after 18 months, the excise rates will be reduced to a 2.5 per cent increase every six (6) months.

For tobacco, the indexation excise rate will be suspended commencing 1st December 2018, and thereafter, reduced to 2.5 percent increase every six (6) months.
A second excise tier for tobacco has been established for local manufacturers of which there will be no indexation for one year.

Tier two is only applicable to local manufacturers and the total allowable volume is capped to 50 percent of their tier one volumes in the prior year.
The local manufacturers have raised concerns on the falling demand for PNG made alcohol and tobacco products due to high prices caused by excise increases and stiff competition from imported substitutes that also involves cheap illicit products.

The Government through this measure intends to protect its revenue base by combating illicit trade and unregulated products and supporting local manufacturing.

These excise measures are expected to raise K70 million in 2019.
(4) Introduction of an export tax on Sea Cucumber (Beche-de-mer) The Government in the 2019 Budget will introduce an export tax of K15 per kg on sea cucumber exports to capture the resource rent on this endangered marine resource, assist National Fisheries Authority's efforts to curb overharvesting and ensure sustainable sea cucumber fishing.

This measure is expected to raise K10 million in 2019.
(5) Continued Relief to Domestic Manufacturers Mr Speaker, this budget will continue to provide relief to our local manufacturers by introducing further amendments to the Customs Tariff Act 1990.
These amendments include:  increasing import duties for similar goods manufactured locally such as wooden furniture, shopping bags etcetera;  ·split the flour tariff into retail and bulk and apply a zero rate to bulk imports and 25 per cent to retail flour imports to encourage local value adding and local production of grain.

 address discrepancies in the tariff code, description and rates.
(6) Moderate Tax Relief for Low to Lower-Middle Income Earners; Finally, Mr Speaker, the 2019 Budget introduces a moderate relief package to our low to lower-middle income earners.

The Personal Income Tax relief package includes: (1) an increase in the tax free threshold from K10 000 to K12 500; and 16 (2) an increase in the second tier 22 per cent tax threshold from K18 000 to K20 000.
The Government through this measure delivers on one of its MTRS strategies to re- balance the PIT tax composition from income to consumption by relieving the tax burden on labour income.

Expenditure 2019 Mr Speaker, consistent with the Medium Term Expenditure Strategy, total expenditure as a percentage of GDP will be reduced to 18.2 per cent in 2019 then to 16 per cent per cent by 2022.

Given this comprehensive strategy, Mr Speaker, the 2019 Budget Expenditure envelope is set at K16 133.5 million.
This comprises K10 636.4 million in operational expenditure and K5, 497.1 million in capital expenditure.

Compared to the 2018 Supplementary Budget appropriation, this budget envelope is projected to increase by K836.5 million or 5.5 per cent.

In terms of key expenditure items, the Government will focus on adequately funding key programs covering Tuition Fee Free Education, Free Primary Health Care, Infrastructure Projects, Agriculture, Tourism and Small to Medium Enterprises.
Importantly, in the 2019 Budget, the O'Neill-Abel Government has reorientated the composition of expenditures substantially by re-prioritising and re-allocating spending from the less efficient expenditure areas to higher value priorities that would enhance overall economic growth and still achieve the strategic development goals of the Government.

As a result, the Government is able to increase capital expenditures in the 2019 Budget by 19.3 per cent compared to the 2018 Supplementary Budget.
11/05 Mr Speaker, the Government in the 2019 Budget is providing, in many cases, substantial increases in sector allocations which include: 1) The Health Sector, which is central to human happiness and well-being.

It also makes an important contribution to economic progress, as healthy populations live longer, are wiser and more productive.

A total of K1, 553.1 million has been allocated to the Health Sector for the 2019 Budget which is 9.6 per cent of the total budget.
The Health Sector has been increased by 3.1 per cent from the 2018 Budget.

K249.8 million is allocated for medical supplies procurement and distribution processes.

K100 million is provided for District Hospitals.

2) The Education Sector plays the pivotal role in educating Papua New Guineans through the delivery of primary, secondary, Technical Vocational Educational Training 17 (TVET) and tertiary education.
These are facilitated through the National Department of Education, Department of Higher Education Research Science and Technology, colleges and universities.

The Government will also continue to invest in infrastructure to accommodate the increasing number of students.
Such programs include; Human Resource Development Phase II – K33.3 million, Secondary Schools Infrastructure Rehabilitation – K20 million, Western Pacific University – K30 million and K20 million for Post Technical Educational Program – Gumine, Enga, Kokopo, Vanimo Polytechnic Institutions.

A total of K1, 378.2 billion has been allocated to the Education Sector in 2019 which is 8.5 per cent of the total budget.

The Education Sector has been increased by 6.6 per cent from the 2018 Budget.
The Tuition Fee Free (TFF) policy is maintained while its funding has been increased from K602 million to K617 million.

The amount excludes the teacher payroll.

3) The Transport Sector has been allocated K1, 287.4 million, making up eight per cent of the total budget.

The sector's budget is increased significantly by 37.4 per cent from its 2018 Budget.
In 2019, the sector will focus on the following priorities such as: the Sustainable Highlands Highway Investment Program – K45m and USD$1bn through the ADB over ten years, the National Highway Rehabilitation Program – K20 million; National Bridge Program – K10.0 million, Missing link Road Program – K17 million); Nadzab Airport Terminal Redevelopment Program – K75.0 million; New International Wharves in Wewak, Vanimo, Manus and Kikori – K8 million; Civil Aviation Development Investment Program K90 million; and, Rehabilitation and Maintenance of Rural Airstrips – K10.0 million.
A number of these major construction projects will be supported by the development partners through concessional loans and Mr Speaker, also, K100m is provided for the re-establishment of PTBs.

4) The Economic Sector is allocated K742.0 million, which is 4.6 per cent of the total budget.

The sector's budget has increased by 11.4 percent from the 2018 Budget.

This reflects the Government's commitment towards the growth of the Economic Sector.
The increased funding is mainly towards ongoing activities with more emphasis on SME's, support of small holders' and growers' access to markets and participation, tourism development and onshore processing.

5) The Administration Sector will now host the Services Improvement Programs, under the Department of Implementation and Rural Development in which we have sought to improve effectiveness and efficiency of SIPs.
We have put in place a framework for the Service Improvement Program (SIP) Budget by allocating 30 per cent to infrastructure, 20 per cent to 18 Education, 20 per cent to Health, 10 per cent to Law & Order, 10 per cent to Economic, and 10 per cent to the Administration sectors .These fixed commitments are complemented by other capital projects approved by the Government.
Total expenditure for the sector consists of K2,042.4 million in operational expenditure which is inclusive of miscellaneous funding worth K1,320.9 million and K2,022.6 million in capital expenditure, inclusive of PSIP and DSIP (K1,080.0 million).
Of the total budget for operational expenditure, K479.0 million is assigned for compensation of employees and K242.4 million is for goods and services; 6) The Renewable Sector has received funding for the New State Land Acquisition Program – K20.0 million, SMEs Funding for Agriculture and Non-Agricultural Activities (K100.0 million), State Equity Funds - Agriculture and others – K100 million, Strategic Defence Against Coffee Berry Borer – K10.0 million, Regional Cocoa Nurseries Program – K10 million and K22 million for Productive Partnership in Agriculture Program (PPAP).
12/05 (7) Small business activities will be supported by the SME Access Risk Financing Facility – K4.4 million and the National Development Bank (NDB) to facilitate SME Funding of Agriculture and Non Agriculture at K100 million.

(8) The Tourism Sector will be supported through the implementation of the Tourism Sustainable Development Project – K50.0 million by the Tourism Promotion Authority (TPA).
(9) The total budget for the Provincial Sector in 2019 is K3, 073 million which is 19.0 per cent of the total budget.

This is comprised of K2, 877.3 million in operational and K195.7 million in capital expenditures.

Funding for SIPs (PSIP and DSIP) worth K1, 080 million has been reallocated under DIRD's budget (Administration Sector) with the province's capital budget being commensurately reduced.

Funding for DSG and WSIP are maintained in the Provincial Sector.
2019 Financing & Public Debt Mr Speaker, a total of K1, 866.7 million will be raised in debt financing to support the funding of the 2019 Budget.

Commensurate with the new MTDS 2018-2022, this net borrowing will be financed in full through external sources totalling K2, 496.1 million of which K629.4 million is for domestic debt redemption.
The external financing for 2019 will be funded through the second tranches from the ADB and the World Bank budget support loans, commercial financing mostly drawings from the Sovereign Bond Trust Account and new concessional project loans.

The Government is 19 also considering extending its external debt portfolio further through the take-up of a budget support loan from the China Development Bank at favourable interest rates.
Mr Speaker, the 2019 planned net borrowing is expected to increase total Government debt to K27 322.2 million by end of 2019, which is equivalent to 30.8 per cent of GDP.

By end 2019, total debt is projected to comprise of K15 940.3 million or 18.0 per cent of GDP in domestic debt and K11, 381.8 million or 12.8 per cent in external debt.
Mr Speaker, the projected net borrowing of K1, 866.7 million, is equivalent to 2.1 per cent of GDP, and translates into a debt-to-GDP ratio of 30.8 per cent which is within the 30- 35 per cent boundaries prescribed in the 2017 Amended Fiscal Responsibility Act (FRA).
Reforms Mr Speaker, reforming the Public Sector continues to be a high priority for the Government to improve the productivity and effectiveness of the Public Service and create an environment that is conducive for private sector expansion and growth.

The public sector reform agenda will focus on improving public finance management through the implementation of the recently approved PFMA.
Going further, the Government over the medium term, starting in 2018 will promote value for money and efficiency through a number of reforms including:  Improving the management of personnel emoluments, through the work of OSPEAC;  Management of Manpower and Personnel Emoluments Ceilings;  Industrial Pay Fixation Agreements;  Reducing overlap by implementing the amalgamation program, and effectiveness through reforming procurement:  Merging National Departments and Agencies; and  Improving the selection of capital projects by creating the committee led by Planning evaluating the financial and economic impacts of each project.
The successes of the 2018 Budget have only been marred by some continued expenditure over-runs related to rising government payroll costs 13/05 The Government's target is to keep Personnel Emoluments (PE) under five per cent of GDP in 2019 and over the medium term.

Commencing on 1st January 2019, we intend to completely overhaul the payroll process with salaries and wages controlled by warrants and hard ceilings, just as is the case for the purchase of goods and services.
Any agency that 20 overspends on their payroll will have to find savings elsewhere in their budget.

The procurement process to engage independent auditors to review the payroll system has commenced.

A priority will be to establish correct manpower data to assess staff on strength and intake into the services will be evaluated and budgeted correctly.
This has been difficult in some areas, such as for teachers, health workers, Police and Defence where there are large movements of personnel, including intake and retirement, and so special efforts will made to ensure that persons in these sectors are fully accounted for and the correct numbers are uploaded into the personnel management systems.

Mr Speaker, we have taken on 4,843 new public servants this year to date.
1,681 teachers, 1,458 health workers, 1,440 in the disciplined forces and 693 in the IRC and Customs.

This brings to total number of public servants to 124,048.

Mr Speaker, by the end of 2018, all of the commodities' boards should be properly constituted and functional.

This Government is committed to the ongoing strengthening of governance, especially as it relates to increasing the transparency and effective management of public monies.
In 2019, some of the large infrastructure projects that have been initiated under the 25PP will come online, including the international submarine cable and domestic broadband cable that will vastly improve connectivity and reduce costs.
Progress will continue on the other key national infrastructure programs, including the Highlands Highway, the Port Moresby and Lae Ports and provincial ports' upgrades, the missing link roads program, hydro and gas power generation, and the airport terminal and runway upgrade.

These are vital transformational projects that will reduce costs for businesses and consumers, improve market access for rural farmers, and promote the further expansion of the private sector.
Mr Speaker, on the back of the APEC event, PNG will continue to embark on a number of structural reforms, as the Government will continue to partner with key stakeholders in removing barriers to doing business and investment in PNG in specific sectors such as aviation, communications and SMEs.
Central to this set of reforms are the recommendations captured in the Consumer and Competition Framework Review and the Financial Services Sector Review which have been endorsed by the Government and will be implemented in 2019.

Also, the Department of Treasury and BPNG are focusing their efforts on improving access to finance through microfinance, SMEs financial and greater financing inclusion programs.
Economic And Fiscal Risks Mr Speaker, although the global economy is anticipated to stabilise in 2019, uncertainty in global trade relations between the US and China continues to pose volatility risk that could impact adversely on commodity prices and our exports in the agriculture, fishery and forestry 21 sector, and mining and quarrying and oil/gas sectors, leading to exchange rate pressures and higher interest rates on external debt.
The earthquake that shook part of the Highlands Region, with associated social, fiscal and economic implications is yet another observation on how natural disasters remain considerable risks to our plans going forward.
Mr Speaker, a number of fiscal risks continue to be present and have become more critical over recent years including:  Delays in early works on some of the major mining and petroleum resource projects will adversely impact GDP growth;  Failure to lift revenue collections and failure to implement reform plans in particular on non-tax revenue will adversely affect the 2019 Budget and the medium term;  Failure to fully control personal emoluments spending will prevent the expected fiscal space needed to support efficient public investment;  Failure to reduce arrears significantly will undermine business confidence and investment;  Management of foreign exchange liquidity and foreign exchange risks finally.
Mr Speaker, failure to obtain the budget support loans in 2019 will lead to an external financing nevertheless, Mr Speaker, the Government remains committed to its Medium Term Fiscal Strategy and will take the necessary mitigation strategies should any significant risks materialise.
14/05 We remain confident that our Medium Term Debt Strategy with a renewed focus on external financing will provide the necessary liquidity to mitigate many of these risks, at least until the healthy balances in the SWF are accumulated.

Conclusion Mr Speaker, overall, 2018 has been a remarkable year given the earthquake in particular.

We have been able to meet the challenges which includes staging APEC admirably.
I repeat that we need to remain focused particularly on the basics of revenue generation, expenditure control and debt management to build on the great progress being made.
As we wind up APEC activities and bid farewell to our international guests, we not only retain the substantial infrastructure improvements built for this historic event and the bolstered trade and economic relationships, we also take away the rejuvenated sense of pride and 22 resilience that have underscored the national spirit this year.

If we continue to harness this spirit, together we can continue to build a better future for our country.
The 2019 Budget is a holistic framework to fix lingering issues from our past, serve the needs of today, and set the foundations for "Building A Broader Economic Base".

I want to thank the Prime Minister and wish him well as he represents us in the coming Leaders’ Summit, the Ministers for Finance and Planning and their hardworking staff, the Secretary for Treasury and his staff, Cabinet and the Ministerial Economic Committee and all the members of this House for your understanding and support.
I commend the 2019 Budget to the Honourable Members and to the people of Papua New Guinea.

Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate on the Appropriation Bills be adjourned and made an order of the day for subsequent sitting.

Debate adjourned.

CUSTOMS TARIFF (2019 BUDGET AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

Second Reading Leave granted to move the Second Reading forthwith.
Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.

23 15/05 Mr Speaker, as I have explained in the Budget speech, the Bill proposes the amendments to suspend the five percent six monthly indexation for alcohol base rate.

The suspension will be for 18 months commencing on1 December 2018 and ending on the 21 May 2020.

From the 1 of June 2020, the excise indexation for alcohol will reduce to an increase 2.5 per cent every 6 months.
This is to minimise the indexation policy on the alcohol excise base rate, for the revenue of the Government.

An amendment to suspend the five per cent six monthly indexation applied to tobacco base rates; the suspension will be for 6 months commencing on the December 1, 2018 and ending 31 May, 2019.

From the June 1, 2019, the excise indexes rate for tobacco will reduce to a 2.5 per cent increase every 6 months.
This amendment is intended to minimise the impact of indexation policy on our tobacco excise base rate.

Mr Speaker, as I said an amendment on the second excise tier for tobacco at half the price of the main tier.

The amendment will be valid for one year, commencing on the December 1, 2018 and ending on the 20 November 2019.
This amendment is intended to create an incentive for consumers from the untapped tobacco market into the tax segment, the measure is intended to include local industry competitiveness against cheap illicit tobacco products.
An amendment to remove triple excisable luxury goods and other goods such as TVs, play box, microwaves etcetera that are now considered household needs , this amendment is intended to ensure excise tax does not apply on luxury goods that are no longer considered luxury, so that household necessities such as microwaves and TV sets are made affordable.

Mr Speaker, I commend the Bill.

Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for subsequent sitting.
Debate adjourned.

GOODS AND SERVICES TAX (2019 BUDGET) (AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

24 Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.
Mr CHARLES ABEL –Mr Speaker, this as I explained in terms of GST is an amendment to remove the Goods and Services GST zero rating status on supplies made to resource companies or supplies made to the mining, petroleum or gas companies, will now be subject to the full 10 per cent of the GST rate.

The administration of this particular zero rating provision has become too complex and flawed with abuse.

The amendment is intended to safeguard government revenue and simplify tax administration.
Also an amendment to tidy up incorrect legislative in the refund provisions.

Mr Speaker, I commend the Bill.

Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for subsequent sitting.

Debate adjourned.

INCOME TAX (2019 BUDGET) (AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.
Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.

25 Mr CHARLES ABEL –Mr Speaker, the Bill proposes: 1.

An amendment to remove the education rebate to simplified administration and; 2.

An amendment to reduce the loss carried forward time period to 20 years for resource companies and primary production and to seven years for other tax payers respectively.
To align with the carry forward rule relating to allowable exploration expenditure and the seven year record keeping period.

This is the simplified tax administration.

3.

An amendment for non-resident insurers to lodge monthly and on the 21st of the following month for a simplified revenue administration.

4.

An amendment to enable the Internal Revenue Commission the powers to prosecute the IRC officers and other external offenders involved in soliciting or bribery offences.
This amendment is to act as a deterrent measure to IRC staff as well as to the tax paying public.

5.

An amendment to facilitate and rectify Papua New Guinea’s membership to the global forum and the signing of the multilateral instrument on the base profits erosion shifting and strengthening secrecy provisions for treaty partners.

The amendment is intended to restrict the IRC from sharing information obtained under any tax treaty.

6.
6.

Amendment to remove the provision on dividend withholding tax credit for individual given that it is now final tax.

The amendment removes the requirement to pay credit given the tax at the individual level is a final tax.

And that other minor technical amendments to correct drafting errors.

Mr Speaker, I commend the Bill.

Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for a subsequent sitting.

Debate adjourned.
Debate adjourned.

16/05 INCOME TAX (INTERNATIONAL AGREEMENTS) (2019 BUDGET) (AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

26 Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.

Mr Speaker, this Bill proposes an amendment to allow for the introduction of any international tax treaty which does not deal with avoidance of double taxation.

Mr Speaker, I commend the Bill.


Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for subsequent sitting.

Debate adjourned.

INCOME TAX (SALARY OR WAGES) (RATES) (2019 BUDGET) (AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.
Mr Speaker, this Bill proposes an amendment to reduce the personal income tax burden on low to middle income earners by increasing tax-free threshold to K12 500 and increase the second tier thresh hold from K18 000 to K20 000.

27 Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for subsequent sitting.

Debate adjourned.
Debate adjourned.

INCOME TAX, DIVIDEND (WITHHOLDING) TAX AND INTEREST (WITHHOLDING) TAX RATES (2019 BUDGET) (AMENDMENT) BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.
Mr Speaker, this Bill relates to the withholding tax credit removal requirement to pay credits on dividend withholding tax because the dividend withholding tax in the hand of the individual now by amendments to the 2018 Budget are now final.

It tidies up those provisions in the dividend withholding tax and income tax interest withholding tax.

I commend the Bill Motion (by Mr Ian Ling-Stuckey) agreed to – That the debate be adjourned and made an order of the day for subsequent sitting.

Debate adjourned.
Debate adjourned.

28 MOTION BY LEAVE Mr JAMES MARAPE (Tari-Pori – Minister for Finance) – I ask leave of the Parliament to move a motion without notice.

Leave granted.

SUSPENSION OF STANDING ORDERS – REARRANGEMENT OF BUSINESS Motion (by Mr James Marape) agreed to – That so much of the Standing Orders be suspended as would prevent the Deputy Prime Minister and Treasurer to present Supplementary Appropriation Bill 2018 forthwith.
SUPPLEMENTARY APPROPRIATION BILL 2018 First Reading Bill presented by Mr Charles Abel and read a first time.

Second Reading Mr CHARLES ABEL (Alotau – Deputy Prime Minister and Minister for Treasury) – I move – That the Bill be now read a second time.

Mr Speaker, I took some time in the 2019 Budget speech to explain the rationales of the 2018 Budget and it simply relates to the additional revenue that has come in at 2018.
The addition to that of a reduction in the capital budget by K277 million and the re-appropriation to the expenditure items that are listed in the speech and also quite clearly in the schedules attached to these amendments.

Mr Speaker, I commend this Bill.

29 Motion (by Mr Peter O’Neill) agreed to – That the question be now put.

Motion – That the Bill be now read a second time – agreed to.

Bill read a second time.


MESSAGE FROM THE GOVERNOR-GENERAL A message from His Excellency, the Governor-General dated 13 November 2018 was announced recommending the expenditure of public monies in accordance with Section 210 of the Constitution insofar as the Bill relates to and provides for such expenditure.

Third Reading Leave granted to move the third Reading forthwith.

Motion (by Mr Charles Abel) proposed – That the Bill be now read a third time.

Motion – That the question be now put – agreed to.


Bill read a third time.

MOTION BY LEAVE MR JAMES MARAPE (Tari-Pori – Minister for Finance) – I ask leave of the Parliament to move a motion without notice.

Leave granted.

30 SPECIAL ADJOURNMENT Motion (by Mr James Marape) agreed to – That Parliament at its rising adjourn until Tuesday 20 November at 2 p.m. at which time the Shadow Minister Finance and Treasury will reply to the 2019 Budget.
ADJOURNMENT Motion (by Mr James Marape) agreed to – That the Parliament do now adjourn.

Parliament adjourned at 4.25 p.m.. 31