Red tape cut allows exporters to skip on taxes

The Ministry of Commerce has cut red tape on exports, but some unscrupulous exporters are taking advantage of eased restrictions to avoid taxes, officials say.

Exporters were previously required in some instances to show proof that foreign buyers had deposited money in foreign accounts to pay for the goods they were purchasing. However, Myanmar traders complained that the requirement slowed exports, and the Ministry of Commerce and then in mid-June the Customs Department removed this requirement.

However, U Win Myint, a director at the Ministry of Commerce, said many traders have used the lack of checks to declare much smaller amounts on their invoices and pay smaller amounts of tax.

Instead of using either the letter of credit or the telegraphic transfer method of moving money through the banks, many traders are instead relying on the informal money transfer network known as hundi.

Many Myanmar traders set up a proxy company in Singapore. They send money to the proxy company using the hundi system and then settle payments in Singapore, rather than have the money cross international borders, partly in a bid to avoid tax.

The hundi method was also popular during the period of economic sanctions, when it was more difficult to transfer money to and from Myanmar.

U Win Myint said companies have been warned to stop using hundi and switch to banks.

“If this keeps going as it is, we will approach this from other directions to normalise the situation,” he said.

The ministry has no plans to end the current transfer payment systems, but is looking at other ways to check up and make sure the payments are legitimate.

U Mya Than, chair of Myanmar Oriental Bank, said even though cutting red tape has facilitated trade, it means more exports are being done unofficially.

“The government – not only the Ministry of Commerce but also the Central Bank – needs to consider the situation and review the policy,” he said.

Border trade in particular often takes place outside the formal banking system. Myanma Economic Bank is still the favoured bank for those who use banks for border trade, as they have an extensive branch network and provide quick service.

Source: Myanmar Times

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