This will be the case initially, even though other countries such as Vietnam are untying their investors from tax, said Dr Maung Maung Thein, chair of the Securities and Exchange Commission Myanmar (SECM) and deputy finance minister, on August 29.
However, he provided no information about the value of tax that investors will be charged, or whether it will be levied by the Internal Revenue Department (IRD) or the SECM.
“The Union Tax Law was enacted before the stock exchange opened, so it doesn’t mention anything about YSX tax,” he said. “This means investors will initially have to pay tax. But in the future we plan to amend the law to grant tax exemptions and we are considering other incentives,” he said.
The IRD has no experience of taxing a stock exchange, and neither the Union Tax Law nor the Securities Exchange Law makes any mention of a tax on equity. Therefore investors and regulators may face legal issues around tax, until the laws are updated.
Dr Maung Maung Thein answered a question from The Myanmar Times about how the YSX will prevent ill-gotten capital inflows, during a press conference on August 29, aimed at introducing the exchange to media.
“Black money is a delicate issue for us. Even before we award the securities licences we have had to repeatedly screen to make sure candidates are not involved in dirty money flows,” he said. “Even if a candidate for a service provider licence meets all the other criteria, if they can’t prove they are clean we won’t give them a licence.”
The SECM will also be on the lookout for large share sales. “If someone is involved in a big transaction, we will have to inform the financial crime unit at the Ministry of Home Affairs, which will investigate. We have to know our customer,” said Dr Maung Maung Thein. “But the money of ordinary customers buying smaller amounts of equity won’t be investigated.”
Daw Tin May Oo, a member of the SECM, said that the YSX’s investment mechanism will not involve any direct cash transactions. Share sales will be paid for from bank account to bank account, via Kanbawza Bank, which is the settlement bank for the exchange.
Banks in Myanmar have an existing alert system. If a customer account has more than K100 million, banks must inform the financial crime unit and the Central Bank of Myanmar’s anti-money laundering program.
Dr Maung Maung Thein also said the SECM will issue a statement banning existing over-the-counter (OTC) markets, which are illegal according to the new Securities Exchange Law. The law states that to establish an OTC market, three securities companies must submit a joint report to SECM before they can be given a licence.
“Before we issue the statement, OTC markets can still buy and sell shares. But after the statement, we won’t allow them to continue. The law says they can receive a five-year jail term for unlicenced trading,” he said. He did not say when the statement would be published, but said the SECM would announce it through state-owned newspapers. There are 156 public companies in Myanmar and many are known to be selling their shares through OTC markets.
Source: Myanmar Times