Wednesday, 26 March 2014

Poor practices prove taxing for government

Rampant corruption and poor collection practices will likely make it impossible for the government to fully benefit from the recently enacted 2014 Union Tax Law, experts said.

On paper, the 2014 Union Tax Law would increase the tax to gross domestic product (GDP) ratio from 3 to 4.5 percent this year providing much needed revenues to the government, but staffing issues as well as taxpayer bribery will continue to be factors moving forward, legal expert U Thaw Nay Zaw told The Myanmar Times last week.

“In the 2010-2011 fiscal year, earnings from tax amounted to 2.3 percent – which is very low – because of widespread evasion and inadequate collection practices,” he said. “People didn’t see the benefits of government services and the government relied solely on income from natural resources.”

“Until 2011, the tax laws had effectively remained unchanged for 40 years,” he said.

One business expert, who asked not to be named for fear of repercussions, said it has become commonplace for would-be taxpayers not to expect public services would be offered in exchange for their hard-earned income.

“We see no benefit in paying taxes. The only difference between white [legal] money and black money is that people with black money have much more of it,” he said, adding that tax collection procedures were negligible under military rule and people are slow to trust the government.

According to the new law, income tax rates for the next financial year will grow to 5pc for a yearly personal income from K2 million to 5 million, 10pc for the K5-10 million band, 15pc for K10-20 million, 20pc for people earning K20-30 million, and 25pc for those earning above K30 million.

Of a population of 6 million in Mandalay, only 44,892 individuals and 207 firms paid any taxes during the 2012-2013 financial year, Mandalay Region’s chief minister U Ye Myint said during a seminar last month.

“A worker’s tax payments should not exceed his rent. It’s also important to keep the gap between the poor and the rich narrow,” said U Ye Myat Thu, joint secretary of the Mandalay Chamber of Commerce and Industry.

The law provides for imprisonment of one to three years for failing to declare income, and from three to 10 years for fraud.

source: The Myanmar Times
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