Now that the law on direct foreign investment has been passed, and sanctions lifted, Myanmar is poised for a surge in economic activity.
Armed with technical advice from international financial institutions and based on examples from the region, the country wants not only to revise its tax laws and procedures, but also to change the way people look at tax.
Efforts are under way to make the taxation system fairer and more transparent, more compliant with democratic practice, less open to corruption, and to bring in more revenue for the state.
Ministry of Finance and Revenue officials organised a workshop in Nay Pyi Taw on Wednesday, November 21 to discuss widening the tax base while reducing the tax rate, and reforming rules and regulations.
The ministry’s Internal Revenue Department levies five kinds of taxes: commercial, income, lottery and stamp tax, plus customs duty collected by the Customs Department.
Union Finance and Revenue Minister U Win Shein said the ministry expects large numbers of foreign investors to enter the country following the lifting of US sanctions in September and the enactment of the foreign investment law earlier this month.
Even though tax revenues have been rising year on year, health and education budgets are inadequate, and the ratio of income from tax to gross domestic product is low at about 3.7 percent for the 2012-13 fiscal year.
This compares with about 17.7pc in Thailand, about 16.1pc in Cambodia, and about 30.3pc in Vietnam.
“Tax reform is an important part of general reform. The current system of tax assessment by the tax office should be replaced by a self-assessment system. We must do more to resolve problems between taxpayers and the tax officials, and we have to change taxpayers’ mindset as well,” said U Win Shein.
International Financial Institutions (IFIs) such as Asian Development Bank, World Bank, International Monetary Fund and International Tax and Investment Centre have been researching the situation throughout this year and will provide the ministry with technical assistance, the workshop said.
Participants found that the main weaknesses of tax systems in developing countries were over-complexity, rigidity, inefficiency and unfairness. The IFIs stress the need for flexibility and equity.
Minister in the Office of the President U Soe Thein said the tax laws and regulations had to be tightened up.
“The ministry should reconsider imposing a penalty when someone fails to pay tax. We need to look at other countries in the region. We also have to change people’s mindset: people should be proud to pay tax,” he said.
Citing the example of Thailand, Kanbawza Bank vice-president U Than Lwin said small- and medium-sized enterprises had an important role to play in helping the government broaden its tax base.
“People need to be encouraged to pay tax willingly. Rates should equitable and fair for all, and the government should stimulate a self-assessment system. If not, corruption will persist,” he said.
KBZ was the second-highest payer of income tax in 2011.
U Hla Tun, a Minister in the Office of the President, said: “The tax system is closely related to politics. Tax reform is the most important thing. First we make paying taxes easier, then we tell everybody how to do it,” he said.