U Win Thin, Chairman, Win Consulting: Interview

Interview: U Win Thin, Chairman

How do you think that tax efficiency and competitiveness could be improved?

U WIN THIN: There are 21 taxes and duties, with the Internal Revenue Department (IRD) collecting five of these: income tax; commercial tax; specific goods and services tax; stamp duties; and lottery tax. The total amount collected by the IRD through these channels constitutes over 80% of government revenue. Under the guidance and financial assistance provided by international development partners such as the IMF, US Treasury Office of Technical Assistance, Japan International Cooperation Agency and Asian Development Bank, the IRD has undergone a set of reforms since 2012 aimed at modernising the department and making it more transparent. Part of this is that in order to address corruption across different government administrations and make the country more tax competitive, civil servants’ salaries should be raised to a reasonable level.

Which industries and geographic areas offer the most attractive tax incentives to investors in 2019?

WIN THIN: In accordance with the Myanmar Investment Law 2016, there are incentives for business investment in promoted sectors including agriculture, livestock production, export promotion, import substitution, power, logistics, education, health care, affordable housing construction and the establishment of industrial estates. Moreover, tax holidays will also be granted if business activity is carried out in various designated development zones. However, investment decisions should not be solely based on the availability of tax incentives. The ease of doing business should also be considered. Currently Yangon and Mandalay rank highest in this respect, with Yangon having the upper hand due to its location and projects under development. Investors seeking tax incentives may also invest in the New Yangon City Project, the 300-acre development of three townships in eastern Yangon. Another option is to invest under Special Economic Zone (SEZ) Law of 2014 in Thilawa SEZ. This attracts high levels of investment due to the SEZ Law which offers lucrative tax holidays and other attractive tax incentives.

What are the business benefits of changing the dates of the upcoming fiscal year?

WIN THIN: Historically, Myanmar’s fiscal year ran from October to September. In 1974 this was changed to April to March to reflect the agriculture-based economy. This was beneficial due to the local climate. However, over the last decade the country has been regularly affected by floods and storms between April and June. This is problematic because it coincides with the accounts preparation timeline for businesses’ tax submissions. Therefore, from a climate perspective, the change is beneficial for businesses. However, it is disadvantageous to some foreign subsidiaries in Myanmar because the country’s fiscal year is now different from the majority of other countries.

How can adjustments to the tax collection system substantially increase tax revenue?

WIN THIN: The IRD has been implementing tax reform since 2012 to develop a modern tax regime. This includes amendments to rules and laws, revising tax rates, restructuring tax administration and introducing the self-assessment system pilot project, which applies to large taxpayer and tax service units. However, there remain areas for improvement if Myanmar is to have a well-developed tax system with increased revenue. The required measures include widening the tax base to ensure that those who pay tax are paying the required rate, monitoring tax evasion, avoidance, mitigation and unentitled tax exemption and relief, and holding any offenders to account. It is vitally important to implement a well-developed self-assessment system online. Value-added tax should replace the current commercial tax rate as soon as possible. People should be educated on the tax system and how to participate effectively.