Economy

Sanctioned Firms Listed Among Burma’s Top Taxpayers

By Simon Roughneen 17 September 2013

RANGOON — A new listing of Burma’s top 100 corporate taxpayers has thrown up a few surprises, not least the appearance of several companies founded by some of country’s top tycoons—businessmen who remain blacklisted by the United States for links to the former military regime and, in some cases, over allegations of drugs trafficking and arms trading.

“Some of the companies were not included on last year’s list so they inquired about this and have complied for this year,” said a senior official at Burma’s Internal Revenue Department (IRD), who asked not to be named.

Companies run by well-known “cronies”— the collective nickname for businessmen deemed to have made their money through opaque deals with the Burmese military—such as Tay Za’s Htoo Trading Company and Steven Law’s Asia World, both featured on the lists of Burma’s top business taxpayers published by the IRD.

Other companies and conglomerates on the lists include Max Myanmar, run by high-profile tycoon Zaw Zaw, as well as Myanmar Brewery, which is part-owned by the Union of Myanmar Economic Holdings Ltd (UMEHL), a shadowy, military-run conglomerate that has not paid taxes in the past.

The criteria for listing, the IRD official told The Irrawaddy, were two-fold: having filed tax returns by March 31, 2013, and to have cleared all tax arrears up to that cut-off date.

Kanbawza Bank, the biggest private lender in Burma, was listed second from top—a ranking that came as something of an eye-opener to Than Lwin, Kanbawza’s vice chairman. “We did not expect to hear we were one of the highest payers,” he told The Irrawaddy. Kanbawza was previously under US sanctions but is now partnering with Western financial giants such as MasterCard, Visa and Western Union.

Citing “irregularities in the system,” Than Lwin said significant potential tax revenue is lost to the Burma government through corruption. “There is a lot of illegal border trading, for example, that is multiples of the legal trade,” he said.

Swathes of Burma’s borderlands have been run for decades as fiefdoms by ethnic militias fighting on-off wars with the Burmese army, while Burma has consistently featured near the bottom of global corruption indices.

The International Monetary Fund (IMF) estimated Burma’s tax revenue at 6.4 percent of GDP for 2012-13. The revenue official who spoke to The Irrawaddy conceded that “Myanmar’s tax-to-GDP ratio is low,” but could not give a precise number.

According to US government statistics, Burma’s tax revenue as a percentage of GDP was 4.3 percent for 2012, compared with 16 percent for Cambodia, 22 percent for Laos, and just shy of 30 percent for Vietnam.

Tax figures in Burma are compiled across an array of ministries, with the IRD responsible for only four of 14 taxes levied, though these taxes, which include commercial and income taxes as well as stamp duties, account for about 90 percent of all revenue, the IRD official estimated.

Lending agencies working with the Burma government have said that tax reform is key to modernizing the country’s economy. The IMF, stressing “the importance of establishing a well-administered and broad-based tax system,” reported in August that the Burma government intends to bring in a full value-added tax (VAT) in the future.

Improving overall tax administration and collection should help boost government coffers going forward, but that will likely mean getting more of Burma’s well-heeled businesses to pay up, as well as levying taxes on consumption. A 2012 report on the Burma economy published by the Brookings Institute, a left-of-center US think-thank, said “taxes on corporate and personal income generate a negligible amount of revenue.”

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