An Assessment of Land Taxation in PNG: A Case Study of Lae City

Abstract

This paper investigates land taxation challenges facing property owners as land tax payers and Lae City Authorities as tax enforcers in Papua New Guinea. Following deep concerns that the land taxation system in the city is grossly unsustainable, a representative stratified random sample of 150 land tax payers and selected city officials was interviewed between May and November 2019 in order to elicit primary data in addition to secondary data extracted from published city’s land tax records. Gleaning from a rational, market–based valuation process for land taxation (Havard, 2001; Babarinde, 2011 and IVSC, 2019), as the conceptual framework, the study analyses data collected to answer three research questions. Highlights of data analysis and findings include a chi-square test producing a correlation coefficient of 0.379 at 0.01 significance level (2-tailed), which indicates a weak but positive relationship between land taxation system in Lae City and land taxation challenges from the tax payers’ perspective. Key challenges facing land tax payers include, inconsistencies in land tax assessment, tax affordability issues resulting in tax avoidance, lack of consultation and awareness, manipulation of the land tax system by unscrupulous city officials, delays in updating the valuation roll, and excessively high land tax. A second chi square test performed for the relationship between the challenges facing Lae City Authorities as tax enforcers and the land taxation system produces a correlation coefficient of 0.487, which also indicates a positive but weak relationship at a significance level of 0.01 (2-tailed). In other words, the combined effect of these two findings is that the challenges facing both the tax payers and enforcers are adversely affecting the efficiency of the land taxation system in Lae City. Some of the key measures recommended by both land tax payers and land tax enforcers for improving land taxation system in Lae City include: outsourcing of land tax assessment and collection to a third party, imposition of tougher penalties on land tax defaulters, updating of the valuation roll and fiscal cadastre, introduction of supplementary valuation roll to capture increases in land value and increased awareness of land tax liability to property owners.