Public Perceptions of Housing Benefit Tax in Papua New Guinea
The research conducted at the University of Papua New Guinea in 2018 focused on the public perceptions surrounding housing benefit tax in the country. The study highlighted changes in taxable values of employer-provided housing, justifying tax adjustments, tax measures introduced in budget documents, and the further justification for these changes to ensure fairness and support for employers providing accommodation. Newspaper reactions reflected concerns about punitive taxes and fairness.
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Public Perceptions about Housing Public Perceptions about Housing Benefit Tax in Papua New Guinea Benefit Tax in Papua New Guinea Francis Odhuno + Ken Devos Mehmet zmen Thomas Wangi _______________________________________________________ 2018 PNG Update University of Papua New Guinea, Port Moresby 14 15 June 2018
Background 2017 Budget: taxable values of employer-provided housing From 1 January 2017 Area 1 2,500 1,500 700 400 160 60 Prior to1 January 2017 Area 1 - - 700 400 160 60 7 Nil Accommodation type Area 2 1,500 1,000 Area 2 Very high cost* Upmarket* High cost Medium cost Low cost Private mess/barracks Government mess/barracks Approved low cost housing scheme - - 500 300 150 50 500 300 150 50 7 7 7 Nil Nil Nil
Justifying tax changes (per budget books) Prescribed values of employee housing subject to tax last updated in 2011 Prescribed values below market price; does not reflect true value Appreciation of housing costs provided a large and growing tax subsidy to employees who receive free housing from employer, but particularly high income earners.
Tax measures (per budget documents) increase taxable component of employer provided housing [benefit] increase taxing threshold by introducing upmarket and very high cost tier of housing Areas/location of residence reclassified to reflect current market prices Kokopo, Alotau and Kimbe upgraded from Area 2 to Area 1 Bwagaoia has been reclassified from Area 2 to Area 3 Arawa, Buka, Lihir and Vanimo upgraded from Area 3 to Area 2
Further justification Change will ensure fairness for all taxpayers Will restore equity between employees living in different housing costs Will encourage and support employers who provide accommodation to employees
Some Newspaper (Public) Reactions (e.g. Post Courier, November 28 & 29, 2016) o Punitive tax o Tax must be applied fairly o It s a rip-off for workers o New tax increase will be a killer o Get rid of the tax o abolish housing tax o punitive tax on housing a gross mistake
Government Response (to Public Reactions) (e.g. Post Courier, November 30, 2016) Reports on housing tax misleading housing tax misunderstood e.g. housing allowance variation is rarely invoked Only high income employees will be affected not to affect low to middle income bracket
Research Objective Explore how public perceived the [proposed] increase in the taxable component of employer provided housing benefit; Identify demographic factors associated with public perception of tax fairness in urban PNG interpret the policy significance of the public s perceptions and attitude towards the fairness of the increase in the HBT.
Survey Data City Distributed Completed Response Port Moresby 800 606 76% Lae 400 371 93% Madang 400 352 88% Goroka 400 323 81% Total 2,000 1,652 83% Sample: employees in public, private, and NGO sectors Obtained by walking the streets, canvasing for respondents
Sample Characteristics and Representativeness Survey PNG Pop* Gender/age broadly represents the PNG population distribution Gender Female Male Age 21-30 31-40 41-50 51-60 Over 60 % 46 54 % 26 35 24 12 3 % 49.9 50.1 % 30.1 27.8 27.8 8.1 6.2 Older age groups [probably] under-sampled affect of age considered further in analysis * 2011 PNG Census
Sample Characteristics % 98 68 18 61 60 28 25 64 5 6 PNG Nationals Married Education Year 12 or below Income less than K1300 per fortnight Public sector employees Live in employer provided housing Get cash house allowance Live in a house/home Live in up-market/very high cost accommodation Pay weekly rent K3000 or more
Findings Q1. All types of housing benefits whether received as cash or non-cash should be taxed the same way. Strongly agree disagree 4% 13% 7% Agree Neither agree or Disagree Strongly disagree 39% 37% 17% agree or strongly agree; hence, majority thinks all types of housing benefits should NOT be taxed the same way. Q5. Concessional tax treatment of employer provided housing is better than receiving cash house allowance. Strongly agree disagree 10% 33% 27% 43% agree or strongly agree; hence HBT still has some merit Agree Neither agree or Disagree Strongly disagree 10% 20%
Findings: Fishers Exact Test of Association Increased housing benefits tax will require me to pay more than my fair share compared to others with higher incomes. Increased HBT should only apply to up-market (K 3,000 rent per week) and very high cost housing (K 5,000 rent per week) Increased HBT will require me to pay more than my fair share compared to others on the same income. Increased HBT should not apply to low (K400,000) and medium (K800,000) cost housing. Concessional tax treatment provided under HBT is better than receiving a cash allowance Demographic factors Gender 0.159 0.018* 0.193 0.165 0.441 Age 0.17 0.258 0.337 0.189 0.405 Marital Status 0.225 0.991 0.013* 0.195 0.410 Education 0.000** 0.000** 0.000** 0.093 0.002** Employer Category 0.144 0.951 0.182 0.427 0.289
Findings: Fishers Exact Test of Association Increased housing benefit tax should not apply to low (K400,000) and medium (K800,000) cost housing. Concessional tax treatment provided under the housing benefits tax is better than receiving a cash allowance Increased HBT will require me to pay more than my fair share compared to others on the same income. Increased HBT will require me to pay more than my fair share compared to others with higher incomes. Increased HBT should only apply to up- market and very high cost housing Housing and Income Characteristics Live in employer provided house Receive rent allowance 0.210 0.316 0.247 0.544 0.780 0.096 0.715 0.272 0.020* 0.079 Housing type 0.539 0.604 0.499 0.631 0.244 House Value 0.331 0.001** 0.020* 0.173 0.134 House Rent 0.920 0.071 0.000** 0.129 0.222 Gross Income 0.000** 0.000** 0.000** 0.054 0.072
Conclusion/Tax Policy Issues Although increasing the HBT could be considered unfair per se, there was some scope for refining and improving the HBT. Housing affordability (value and rent) is an issue that needs to be addressed and the increases in the HBT needs to be commensurate with increases in salary and wages. As long as the HBT is applied appropriately, e.g. to more wealthy taxpayers or those who could absorb the cost as part of their employment fringe benefits, it was still feasible. People feel disadvantaged when they receive cash house allowance instead of employer provided accommodation, suggesting that not many people are aware of, or utilize, housing allowance variation provisions.
Thank You Q & A
