Tuesday, July 25, 2017

Low property tax revenue despite higher sales

There is a shortfall in revenue collection in the real estate sector despite the fact that all sales in the Mandalay Region are subject to a 10 percent tax on the profit gained from the initial price.

Properties in eastern part of the Mandalay city are being developed and modernised. Phyo Wai Kyaw / The Myanmar TimesProperties in eastern part of the Mandalay city are being developed and modernised. Phyo Wai Kyaw / The Myanmar Times

U Kyaw Aung Moe, deputy director at the regional Internal Revenue Department, said that the tax revenue represents only 10pc of the total real estate sales.

“This is because the properties have been passed from one person to another and it is difficult to trace and receive the tax from the original owner.

“Also adding to the difficulties is the fact that the tax must be paid within 30 days,” said U Kyaw Aung Moe via a telephone conversation with The Myanmar Times last week.

According to the Internal Revenue Department’s list, real estate sales have been increasing yearly in 28 townships in the Mandalay Region, with over 3300 sales recorded in 2014-15 financial year.

There were over 4700 sales in the 2015-16 tax period.

However, tax revenue from those sales was less than 10pc of the projected revenue.

U Kyaw Aung Moe said that people who have sold their properties, paid the capital gain tax and have clearly indicated where their income comes from will receive tax reliefs when purchasing their next cars, houses or land.
Capital gains tax is only applicable if the sale is made within three years of the initial purchase.

U Aung Win, a real estate agent from Mandalay, said that property agents are unaware about the benefits they will receive when they pay their taxes.

He said that these agents are only concerned with the immediate cash that they will ‘lose’ when they
pay the tax.

U Aung Win added that in order to raise the numbers of tax payers, other government departments need to make the public aware of the benefits when they pay their taxes.

“When the real estate agents are informed about the taxes, they either don’t live at their original address or they have moved to another place. This is one of the reasons for the low tax returns. If these property traders are truly thinking about buying another place, then this tax is something they should be paying. We, real estate agents, should also explain this to others in the trade,” said U Aung Win.

The new Income Tax Law states that real estate buyers have to pay 15pc for properties costing up to K30 million, 20pc for properties costing between K30 million and K100 million, and 30pc for properties above K100 million.

Translation by Kyaw Soe Htet