Public Perceptions of the Housing Benefits Tax in Papua New Guinea

One of the major tax policy measures in the 2017 Papua New Guinea (PNG) National Government Budget is the proposal to increase the taxable component of employer-provided housing benefit. The flurry, however, of newspaper reports that followed the announcement of this proposal suggests that public belief in the fairness of this proposal is a mix, at best. The objective of this study is to measure and assess the dimensions that influence public’s perceptions about the fairness of increasing the taxable component of employer-provided accommodation. To do this, data were obtained from a survey of public and private sector employees in four major urban centres: Madang, Lae, Goroka, and Port Moresby. The results from Fisher’s exact tests of (statistical) associations, with significant values estimated using Monte Carlo methods, show that Housing Benefits Tax (HBT) should only apply to upmarket and very high cost housing. In general, some support for the HBT generally are evident. Mix findings are reported regarding HBT as a way to contribute to public revenue used to pay for essential accommodation. Testing the impact of demographic factors support increasing the HBT based on whether the benefit is perceived as a societal or personal gain. The results reveal that middle-aged participants, and to some degree, those with higher levels of education perceive HBT as societal good. The perception of reasonableness or (un)fairness of HBT depends on whether or not an employee lives in employer-provided accommodation. These results are useful in interpreting the policy significance of the public perception about HBT and the country’s tax system generally. The HBT has implications for the perceived unfairness of the overall tax system in light of the larger issue of unaffordability of housing in PNG. If the lack of housing, and then the income of citizens prevents them from obtaining affordable housing, then an increase in the HBT could have a detrimental effect on taxpayer confidence.