Papua New Guinea's food tax cut has delivered only about eight toea in every kina of foregone revenue to the poorest 20 per cent of households, three economists wrote on the Devpolicy Blog.
Christopher Hoy, an economist with the World Bank and a McKenzie Research Fellow at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne, wrote the article with Kingtau Mambon and Bobby Kunda, lecturers in economics at the University of Papua New Guinea.
Their article sets out findings from a new World Bank working paper. The PNG government removed tax in June 2025 from rice, flour, tinned fish, tinned meat, chicken, noodles, biscuits, cooking oil, tea and coffee, to ease cost-of-living pressures on poorer households.
The policy has so far cost almost half a billion kina in foregone revenue, the authors wrote. Of every kina given up, stores and wholesalers kept 36 toea and the richest 40 per cent of households received almost 40 toea. There are 100 toea in a kina.
The poorest households gained little because they largely grow their food rather than buy it, Hoy, Mambon and Kunda wrote. What they do buy comes mainly from informal stores such as canteens and tuckerboxes, which are unregistered and do not charge tax.
They also rarely shop at stores facing enough competition to force a tax cut to be passed on to customers.
The study drew on monthly supermarket prices collected by the National Statistical Office and the Bank of PNG, a census of prices in every formal supermarket in Port Moresby collected by a University of Papua New Guinea team, weekly online prices from the two chains that sell food online, and a monthly phone survey of about 1,000 households run by Digicel with the World Bank.
In Port Moresby supermarkets, prices of the exempt items fell almost immediately relative to comparable foods that stayed taxed, and without enforcement requiring stores to cut prices, the authors wrote. They put that down mainly to competition.
In central Port Moresby, where the nearest rival supermarket is on average about 150 metres away, stores passed on the full cut immediately. Elsewhere in the city supermarkets initially passed on about two-thirds.
Outside formal urban stores almost nothing changed, the authors wrote. The phone survey found pass-through of over 80 per cent in formal stores in urban areas, but little or no price change in informal stores anywhere, or in formal stores in rural areas.
Over the 19 months the tax cut is currently expected to run, it will cost about K600 million. About K50 million of that reaches the poorest fifth of households, the richest fifth receive around K145 million, and stores and wholesalers retain about K215 million.
Paying the same K600 million as a cash transfer to every household, with no targeting, would deliver K120 million to the poorest fifth, they wrote. The money could instead fund a national rollout of the child grant programme the government piloted in 2025.
The authors asked 237 economists and policy specialists, including in PNG, to predict the results beforehand. The experts thought stores would keep half the foregone revenue, underestimating how competitive Port Moresby supermarkets are and overestimating how far prices would move elsewhere.
In the April 2026 round of the phone survey, more than 70 per cent of households ranked a food tax cut first or second among six policy options for supporting poor and middle-class households.
The following month a randomly selected group of respondents were told the price cuts were concentrated in large urban supermarkets where richer households shop, and support among them fell sharply, the authors wrote.
PNG policymakers must decide in the coming budget whether to extend the tax cut beyond the end of 2026. Another year costs about K400 million and delivers roughly K32 million to the poorest fifth, while the same sum paid as an untargeted cash transfer would put about two and a half times as much in the hands of the poor, Hoy, Mambon and Kunda wrote.