The two speakers will present their joint work with Chris Hoy, Matias Strehl-Pessina, Ruggero Doino and Darian Naidoo. This co-authored paper examines the pass-through and distributional incidence of PNG’s recent VAT exemptions on food in a high-informality, lower-income setting. Utilising a difference-indifferences design and comprehensive data—including administrative records, supermarket price censuses, and household surveys—the paper estimates pass-through by comparing price changes between exempt and non-exempt items and measure incidence using household-level data on quantities, expenditure, and place of purchase.
The findings reveal near-complete pass-through in urban formal supermarkets but minimal price reductions in informal and rural stores, driven largely by local retail competition. In terms of incidence, VAT exemptions are highly regressive: only five cents of every dollar in foregone revenue accrue to the poorest quintile. This is due to poorer households’ reliance on informal markets, subsistence farming and consumption fewer exempt items.
Experts systematically misjudge pass-through, significantly overestimating benefits for the poor. These results illustrate how informality, competition, and demand elasticity shape the pass-through and incidence of food tax exemptions, raising serious concerns about their effectiveness as a poverty alleviation tool.
The monthly ANU-UPNG seminar series is part of the partnership between the ANU Crawford School of Public Policy and the UPNG, supported by the PNG-Australia Partnership.
Speakers
Bobby Kunda is an economics lecturer at the University of Papua New Guinea.
Kingtau Mambon is an economics lecturer at the University of Papua New Guinea.