Amid Mass Tax Evasion, Burmese Public Demands Reform

By Lawi Weng & Thet Swe Aye, Reform 10 April 2013

RANGOON — Hundreds of businesspeople in Burma’s biggest city have called on lawmakers to reform the country’s tax system, criticizing poor enforcement and a lack of accountability that has allowed more than half of taxpayers, including many wealthy cronies, to avoid paying their dues.

At a public hearing in Rangoon on Tuesday, the businesspeople made their complaints before major lawmakers including opposition leader Aung San Suu Kyi and Shwe Mann, speaker of Parliament’s Lower House.

“We have to pay a lot [of taxes], but 70 percent [of Burmese people] don’t pay taxes,” said one businessman from the Myanmar Petroleum Trade Association, citing 2012 statistics from the Ministry of Finance and Revenue.

With the current broken tax system, he added, Burma’s businesses will likely struggle to compete with their counterparts in the region, especially as Southeast Asian countries aim to establish a free trade area by 2015.

Shwe Mann said the government did not condone tax evasion and that nobody was above the law, but acknowledged that the country was still in a process of ongoing reform.

“Our government does not allow these people [to evade their taxes] officially,” he said at the forum, hosted at the headquarters of the Union of Myanmar Federation of Chambers of Commerce and Industry. “If you know of someone who avoided paying taxes, you should present the case to Parliament and we will take action.”

Suu Kyi said the government had a responsibility to ensure the taxation system did not give unfair advantages to the wealthy.

“When we set up the taxation system in this country, it was for the benefit of the people, and the public should be aware of that,” she said. “The government has a duty to raise awareness. It should consider both sides when taking taxes from the people.”

Some of Burma’s biggest tycoons are conspicuously absent from a list of top-paying taxpayers released by the country’s Internal Revenue Department (IRD) last year.

The list of 100 companies which paid the most in commercial and income taxes in the last fiscal year showed that relatively small companies were the most heavily taxed, while huge conglomerations run by cronies of former ruling generals bore hardly any tax burden.

Tobacco and alcohol companies, along with a mix of other businesses in a range of industries from mining to tourism and banking, were among the biggest taxpayers.

Myanmar Brewery, a Burmese-Singaporean joint-venture company, topped the list for both income and commercial taxes in the fiscal year ending on March 2012, while other partly foreign-owned companies, including Myanmar CP Livestock, an affiliate of Thailand’s Charoen Pokphand Group, were also among the top taxpayers.

Noticeably missing from the list of major earners were some of Burma’s biggest corporations, including the Htoo Group of Companies owned by Tay Za, a Burmese business tycoon with close ties to former dictator Sr-Gen Than Shwe.

Tay Za has long been accused by the Burmese public of evading his tax obligations, but the tycoon has never been formally charged. He owns a large network of businesses, and it was unclear whether he controlled some of the smaller, lesser-known companies that were among the country’s major taxpayers.

Also absent from the IRD’s list was Asia World, Burma’s largest and most diversified conglomerate, which was founded by former drug lord Lo Hsing Han and run by his son, Steven Law.

The military-owned Union of Myanmar Economic Holdings, a partner in many joint ventures, was also missing, as were most companies associated with the Union of Myanmar Federation of Chambers of Commerce and Industry.

Two companies that did make the IRD list, despite their connections to senior military figures, were Kanbawza Bank, part of the Myanmar Billion Group founded by Aung Ko Win (aka Saya Kyaung), and Max Myanmar Construction, part of the Max Myanmar Group of Companies owned by Zaw Zaw.

These rare exceptions did not, however, mask the fact that some businesses appeared to enjoy exemptions from taxation, thanks largely to their privileged ties to Burma’s former ruling generals.

Some critics say the problem stems from a history of lax enforcement of tax laws.

“It seems that those who were able to avoid paying taxes in the past are still able to do so,” Han Tun, a former IRD official who now writes about tax-related issues, told The Irrawaddy in an interview last year.

He noted that under Burma’s military-drafted 2008 Constitution, companies were required to pay taxes on their earnings.

“The trouble is that enforcement is still very weak, despite the new rules,” he added.