Entrepreneurs ask finance minister to reconsider special tax

Planning and Finance Minister U Kyaw Win received a barrage of requests to cut taxes during a meeting with a group of almost 50 business associations in Yangon earlier this week.

The minister met with entrepreneurs at the Union of Myanmar Federation of Chambers of Commerce and Industry, to ask their opinions on economic development and learn about the challenges they face.

Overwhelmingly, businesspeople asked for taxes to be reduced or restructured. The new government has prioritised tax collection as it tries to climb off the bottom rung of tax yields worldwide.

An official from the Myanmar Gems and Jewellery Entrepreneurs Association said that lower taxes would help to legalise trade. “Most gems imports from abroad are illegal but if taxes were lowered we could have an official trade,” he told the finance minister. “The ministry should consider removing the special commodities tax on gems and jewellery, and charging only commercial tax.”

The special commodities tax was passed by the former government in January under the Union Tax Law for 2016, payable in addition to income tax and capital gains tax.

It is charged on landed costs for imports, or on sales proceeds for locally produced goods, and applies to alcohol, cigarettes, tobacco, teak, jade, gems, precious stones, jewellery, vehicles, natural gas, petrol and other fuels.

U Kyaw Win, chair of the Myanmar Gold Entrepreneurs Association, said the special commodities tax is also causing problems for gold traders. “Gold is not like other commodities, because consumers buy it and sell it back again. The ministry should reconsider the tax system for gold, because it is not appropriate to charge a tax on every sale,” he said.

“Gold shop owners are finding it difficult to charge the special tax to buyers when they make jewellery, and some have run into problems.”

The government should also consider establishing a central gold market, he said. A gold and metals exchange is on the cards, though state media reported earlier this week that plans had been shelved due to a lack of enthusiasm among traders.

U Myint Soe, chair of the Myanmar Garment Manufacturers Association, asked the minister to cut taxes on his industry entirely. The garment sector in Myanmar depends on the cut-make-pack model, which operates on narrow margins, he said.

Until the sector develops, it is unfair to charge a 2 percent export tax, he added, “We require a 0pc commercial tax on both imports and exports, not just on imports.”

In Mon State, high vehicle taxes promote smuggling, said U Hla Shein, chair of Mon State Chambers of Commerce and Industry. He asked U Kyaw Win to cut licence registration fees for motorbikes from K1 million to K100,000. “The cost of registering for a licence is so high that there are many illegal motorbikes. If you amend this, the country will benefit from more tax,” he said.

U Kyaw Win said that he had taken the issues on board. “Tax is a cornerstone of economic development. I will consider the facts presented in this meeting; there are some things that can be amended and some that cannot. Above all, we will prioritise the interests of the country.”

Under the military regime domestic businesses typically evaded taxes. According to the Asian Development Bank, Myanmar has one of the “lowest levels of tax yield in the world”. It said the actual tax yield was calculated at just 6.6 percent of economic output in the 2013 fiscal year.

Since U Thein Sein’s government took power in 2011, tax collection has been slowly improving, though evasion remains the norm. The annual list of top taxpayers published by the IRD since 2014 shows payments are rising, with the highest revenues coming from import-export businesses and the banking sector.

The revenue department collected over K158 billion in tax in the 2011-12 financial year, over K402 billion in 2012-13, over K412 billion in 2013-14 and more than K549 billion in the 2014-15 financial year.

 

 

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