Likely Effects of PNG Cutting Import Duty on Vehicles

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On  29/11/2019  the Treasurer of Papua New Guinea (PNG), Hon. Ian Ling-Stuckey, in tabling the 2020 national budget, announced that as from 1 January, 2020 buyers of imported new and reconditioned motor vehicles for personal use currently attracting 100 per cent duty or more (engine capacity more than 2.7 litres), will be charged 40 per cent duty. For imported motor vehicles for personal use currently attracting less than 100 per cent duty (engine capacity less than 2.7 litres), buyers will pay 20 per cent duty [1].

In making this announcement, Minister Ling-Stuckey explained that the reason for the reduction of duty on imported motor vehicles was to make them more affordable for everyone. The customs duty regime on imported motor vehicles that was amended in the 2020 national budget had been in force for at least 10 years.

Residents of PNG's cities and major towns are very aware of the congested road traffic that has increased drastically in the past few years.  They are equally aware of the severe impact this increased traffic has had on the condition of PNG's urban road network. A 2018 evaluation of road management [2] in PNG concluded that the poor state of roads in PNG is due to a combination of low levels of road funding and deficient road management2.  However, the dramatic increase in road traffic, at least in urban areas, has undoubtedly played a major role.

PNG isn't the only Pacific Islands country experiencing the adverse effects of the influx of relatively inexpensive reconditioned motor vehicles for personal use, mainly from Japan.  Increased urban road traffic  in these countries, including Solomon Islands, Fiji, Vanuatu, Tonga and Samoa, has created difficulties for local authorities, including traffic police, public health professionals and  urban planners.

In the Federated States of Micronesia (FSM), Pohnpei and Chuuk States are experiencing environmental degradation due to the unauthorised disposal of broken-down motor vehicles in roadside vegetation3.   FSM's problems with disposal of unwanted motor vehicles are almost wholly due to its very low import tax on reconditioned motor vehicles from Japan, a mere three per cent of each vehicle's value. When a vehicle owner decides that he no longer wants to continue paying for vehicle repairs, he simply pushes the unwanted vehicle into the roadside vegetation and buys another vehicle. To bring this blight to the attention of FSM's population, an environmental awareness group has published a calendar depicting popular local scenic views, each with an abandoned vehicle jutting from the lush vegetation [3].

Japan developed the global export of its used motor vehicles to counter rising levels of motor vehicle exhaust pollution in its urban areas and to support its local motor vehicle industry. Motor vehicle owners are permitted to retain their existing vehicles after two years of ownership, but the registration cost of these vehicles increases sharply each year after this date. Most Japanese vehicle owners prefer to replace their existing vehicles with new vehicles after two years, creating a massive glut of used vehicles that must then be exported. In effect, Japan has created a way of exporting its motor vehicle exhaust pollution problem to the rest of the world while stimulating its domestic production of new motor vehicle