KBZ Bank Tops Tax-Paying List, Alongside Army-Owned, Blacklisted Firms

By Kyaw Hsu Mon 23 December 2014

RANGOON — Burma’s Internal Revenue Department has announced that Kanbawza Bank (KBZ) topped the list of corporate tax payers in 2013-2014, while two army-owned companies paid the most in sales tax.

Among the other top corporate tax contributors to the government coffers last year, according to the department’s figures, are a number of large conglomerates owned by US-blacklisted drugs lords and ex-junta “cronies.”

The department released a top 1,000 list of tax payments by Burmese companies online Tuesday and identified the top 100 tax-paying companies in a list published in the state-run media. The list breaks down the biggest payers of corporate and of sales taxes last year.

KBZ paid more than US$17 million in corporate tax, making it the biggest payers of corporate tax. Myawaddy Trading Company and Dagon Beverages Company topped the sales tax list, with both firms paying more than $10 million last year, according to the department’s figures.

KBZ Group owns one of Burma’s largest banks and also has business interests in the domestic airline industry; it was founded in the 1990s in the Shan State capital Taunggyi and is owned by Aung Ko Win. Unlike some of the other large firms set up during the junta years, KBZ is not on a United States Treasury’s blacklist.

Myawaddy Trading Company and Dagon Beverages Company are among a range of subsidiary owned by the Union of Myanmar Economic Holdings Ltd, one of two massive conglomerates run by the Burma Army.

The second, third and fourth largest payers of corporate tax to the government are Asia World, Shwe Taung Development and Max Myanmar, respectively, the department announced. It did not specify the taxes paid by the firms, other than to state all had paid between $4 million and $5 million.

Asia World is one of Burma’s biggest conglomerates and owned by Steven Law, a businessman on the US blacklist because of ties to the Shan State drugs trade. Shwe Taung Development is a sprawling corporation owned by Aik Htun, also on the blacklist because of ties to the illicit drugs trade. Max Myanmar conglomerate is owned by Zaw Zaw, who remains blacklisted because of past connections to the former junta.

There were 22 gem-trading companies among the 100 tax-paying companies listed on Tuesday, indicating the importance of the lucrative mining sector to Burma’s economy and government revenues.

Military-owned firms and businessmen close to the former regime have long dominated the economy, a situation that is only slowly beginning to change as economic reforms are introduced and the country opens up to foreign investment.

Among the key reforms introduced by President Thein Sein’s government are efforts to revise the tax collection system through measures that aim to improve collection of sales, corporate and property taxes.

The Internal Revenue Department has said that its tax collection methods are improving and government revenues from tax are rising.

Myo Min Zaw, the deputy head of Rangoon Division’s internal revenue department, said the number of companies registering with the department and complying with company tax requirements was growing.

“As the numbers of registered companies become bigger year by year, the amount of tax paid by companies also increases,” he said, “and KBZ’s corporate tax amount paid has become the highest.”

Myo Min Zaw said challenges remained, however, as tax evasion was a problem among businesses. “Some businessmen may have their various issues, I hope that they will definitely pay tax later,” he said, without specifying how many firms were still due to pay taxes.

Department officials said in late October that the department expects to collect about $4 billion in all taxes this budget year 2014-2015. In 2013-2014, the department said it collected 3,852 billion kyats, a little under $4 billion against last year’s exchange rate, while a year earlier it collected about $3.1 billion.

The expected tax revenues fall short, however, of the most recent International Monetary Fund projections for tax collection by the Burmese government.

Maung Aung, an economist and consultant to the Ministry of Commerce, said he believed tax evasion remains common in Burma. “There are still some businessmen evading tax. Even though they pay some tax, some people are still evading taxes, people have told me,” he said.

He said the amount of tax collected by the government is low and insufficient to cover the government’s plans to expand expenditures in coming years.

“Right now, the government’s public expenses, for example on education and health, are going up, but the tax revenues remain low,” Maung Aung said.

“The amount of collected tax represents only about 6 percent of the total GDP [Gross Domestic Product],” he said. “The government should raise awareness of the tax paying among the public and they should find out other ways to collect more the tax.”