An Enquiry on Tax

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Fairness: A good tax system should distribute the tax burden fairly among individuals and businesses based on their ability to pay.  photo:ILLUSTRATION: Image used for illustrative purpose/SHUTTERSTOCK

We have been seeing more than our share of deaths and destruction within this beautiful country of ours, so let’s spare a little time to lighten up the mood by dwelling on the tax system and some of its stats. Spoiler alert: you be surprised!
The five typical features of a good tax system are fairness, adequacy, simplicity, transparency, and administrative ease. Let’s bring all these down to earth in Myanmar. We have spoken to IRD (Internal Revenue Department) to get ourselves updated on current issues of the day.

The good features are all here?
Fairness refers to the tax system treating all taxpayers equally and consistently. People and businesses would pay their fair share of tax, and income should be subject to tax only once. Yet fairness as defined by whom? Some businesses and individuals in states and regions outside of central government control end up paying some sort of protection money to EAOs, rebels or NNCP terrorist groups. Some restaurants in major towns and cities are still evading the payment of five per cent commercial tax by either refusing to issue receipts or asking patrons to fork out extra for the shop, having to stick stamps onto receipts.
Among the three siblings of regressive, proportion and progressive taxes, most of Myanmar’s taxes are not progressive in nature yet, resulting from the inability to assess one’s income or wealth accurately.
Tax collections are not adequate either at present. We are running budget deficits for fourteen out of the past fifteen years. The country is grossly short on infrastructure to supply basic services.
Simplicity is one area that the Myanmar tax system can be proud of. That could be a result of a lack of advancement in the economy and the financial system. For instance, most taxes on transactions, such as properties or cars, are based on the value of the property and apply a fixed percentage of tax. The value of the property is also only officially determined for tax purposes. There is also no centralized transaction register either. There is fat hope for those wanting to do a valuation report of any property here.
Transparency refers to taxpayers’ and citizens’ ability to learn how the money collected from them was distributed. Taxpayers being clear on exemptions, deductions, tax credits, etc. Since 2021, the transparency has somewhat decreased, based on the disclosure of spending and allocations by the central government. At the ground level, we also need transparency, as the lack of it encourages corruption across all civil services. A good example would be the change of ownership titles for farmland. Without openness and publicity thereof on fee structure, citizens ended up having to cough up whatever amount demanded by civil servants working in these departments, just for the latter to do the job they get paid for by the government.
The last of the lot, the administrative ease, refers to both the collectors and taxpayers. The system itself cannot be cumbersome or expensive. At present, due to different registration requirements of various government departments, citizens, business owners and companies are given a run around having to register at different places, go to different departments, etc. There is also the issue of frequent changes of tax collectors and assessors, requiring the taxpayers to restart the whole process from the beginning.

Here comes interesting stats
In terms of evasion of commercial tax, the government has taken action at least 884 times in the last financial year. Fines have been imposed depending on the frequency of the offence, a total of K980 million. Yet, it still represented only 0.03 per cent of the total commercial tax collections of the year.
Out of 283 branches of IRD across the country, only four per cent fall under SAS (Self-Assessment System). Yet collection-wise, offices under SAS collected 80 per cent of the taxes. The moral of the story seems to be to trust the taxpayer instead of the tax collectors. Most countries have also done away with OAS (Officer Assessment System), too.
There are many hotlines, branches and emails to ask for details on the taxes and clarify things. Yet, disagreement with the assessment can only be via written correspondence to the director-general of IRD.
The surprising finding in our inquiries was the fact that there has not been any reduction in tax revenues collected after 2021. Yes, there was a reduction during the COVID period, but not after that. We were saved by the SAS, perhaps.
Legal systems, integration issues, and high-level pushes are lacking to ensure that Myanmar has one unique ID number for every individual and entity that could be used for ALL government departments. This centralized registration system is still not in place yet.
Last but not least, the issue of Facebook getting all ad revenues out of Myanmar-based companies, targeting Myanmar consumers and not paying any income tax here, is unlikely to be addressed at any time soon. Meanwhile, Myanmar continues to lose out on its share of tax revenues from the number one social media platform.

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