Papua New Guinea's GST growth signals shifting economic priorities
Papua New Guinea's goods and services tax (GST) has become a key indicator of economic activity across the country. Since 2020, provincial GST revenues have climbed steadily, rising from around 1.2 billion PGK to 1.8 billion PGK in 2024. This growth follows reforms and shifting economic conditions that have reshaped how the tax is collected and distributed.
GST has long been a major revenue source for Papua New Guinea, accounting for 15% of national government income and 80% of provincial revenue since 2012. The tax is managed by the Internal Revenue Commission (IRC), with collections split between domestic sales in the provinces and imports at international ports. Until 2017, the national government kept 65% of all GST collected, but its share has since declined due to policy changes.
The tax saw rapid growth between 2012 and 2014, driven by a resource boom. However, collections dropped in 2015 and 2016 after commodity prices fell and drought hit the economy. Another decline came in 2020 because of the pandemic, followed by a dip in 2022 when fuel was temporarily exempted from GST. Recent reforms have played a role in the tax's recovery. Changes included removing GST exemptions for educational institutions and resource sector suppliers, stopping the offsetting of GST refunds against other tax debts, and lifting GST on fuel during high inflation. A 2018 reform also increased provincial shares of locally collected GST to between 20% and 30%, boosting revenues outside the two main economic hubs. Since 2020, provincial GST collections have grown at an average annual rate of about 10%, reaching 1.8 billion PGK in 2024. Import-related GST has risen more slowly, from 2.5 billion PGK to 3.1 billion PGK over the same period. Factors behind this shift include higher domestic sales after COVID-19, better tax administration, and major projects like PNG LNG, which have reduced the share of imports in total GST. Historically, the National Capital District and Morobe province generated more GST than all other provinces combined. But their dominance has weakened since 2015, as economic activity spreads to other regions. Meanwhile, collections at ports fell between 2017 and 2022 before recovering slightly in 2023. Unlike GST, other taxes have struggled. Company tax revenues have dropped by 18% since 2012, while personal income tax remains below its 2012 level in 2024.
The steady rise in provincial GST revenues reflects broader economic changes in Papua New Guinea. With reforms improving collection efficiency and decentralising revenue, the tax now plays an even bigger role in funding local governments. As imports stabilise and domestic activity grows, GST is likely to remain a critical part of the country's financial system.
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