Food Tax Exemptions Often Miss the Poorest Households

• Papua New Guinea removed its 10% VAT/GST from ten staple food categories in June 2025 for 19 months, at an estimated revenue cost of about $150 million.
• The tax cut was passed through strongly in competitive urban supermarkets, but average national pass-through was only about 64%; rural areas and informal shops saw little price effect.
• Competition mattered: stores facing nearby rivals reduced prices more, while less competitive retailers kept more of the tax saving.
• The policy was poorly targeted: the poorest 40% of households received only about 16% of the foregone revenue, while the richest 40% received about 40%.
• Researchers estimated only about 64 cents of each dollar of foregone revenue reached consumers, with the rest retained along the supply chain.

Source: devdiscourse.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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