Tuesday 18 March 2014

New tax law sees marked rate reductions

Parliament has approved changes to the tax law for the 2014-2015 year that will see many tax rates lowered and new tax breaks introduced as an incentive to reign in endemic tax evasion and illegal trade, officials said.

However industry insiders believe the lower rates will not be enough to change current practices.

On March 11, Pyidaungsu Hluttaw approved a draft on income and commercial tax rates as part of the 2014 Union Tax Law that aims to increase the tax to GDP ratio from between 3 and 4 percent to 4.5pc, a tax widening trend the government says will continue year on year.

The 2014 Union Tax Law, incorporating the revised rates, was then submitted to the President’s Office for passage into domestic law on April 1.

DFDL deputy managing director William Greenlee said that “the amendments are aimed to encourage Myanmar citizens and companies to comply with the tax laws and to minimize risks of tax evasion”.

According to the new law, first-time property buyers will now be subject to a 5pc commercial tax for property valued up to K50 million, 10pc for up to K150 million, 20pc for up to K200 million and 30pc for property valued above K300 million.

Nevertheless, taxpayers would be able to reduce tax payable on property by deducting taxes already paid from the value of the property, National Planning and Economic Development Minister U Soe Thar said last week from Nay Pyi Taw during a speech announcing the new law.

“We hope these proper rates for government employees and other ordinary people will help people to know the system and participate in tax collection.”

High-income earners will have a monthly tax bill, although the new laws raise the cut-off for paying monthly tax from people earning K120,000 per month to K160,000 per month.

Commercial tax for luxury teak and hardwood logs, pieces and finished products was halved from 50pc to 25pc, while the same tax on jade and polished precious gems was also halved from 30pc to 15pc, soothing in part the concerns of gems dealers who claimed the previous tax was making the trade unprofitable.

U Than Maung, a jade and gem trader in Yangon’s Tarmwe Township, said reducing illegal trade of precious commodities could garner millions of extra kyats in government annual revenue though he reiterated that more reforms were necessary to liven the sector.

“The government should also try to ensure taxpayers get benefits from paying regular taxes,” he added. “We don’t get any benefits even though we comply with tax.”

Commercial sales of raw stones and gems however remain the same, currently taxed at 30pc, while taxes on tobacco and alcohol products will remain the same despite an attempt by lawmaker Daw Khin San Hlaing to raise these taxes to 200pc.

The current tax brackets of 100pc for cigarettes and 50pc for tobacco products and alcoholic beverages is already problematic, industry insiders said.

U Thein Gha, owner of a liquor shop in Dagon Seikkan township, said Yangon retailers regularly avoided paying taxes on commercial sales of alcohol.

“Almost all shops in this township don’t pay tax,” he said, adding the system did not reward those who abided by it. Instead, regular taxpayers would be driven out of business by competitive non-taxpaying prices elsewhere.

Minister for Finance U Win Shein said on state television that the current tax framework is riddled with weaknesses and that the tax law would be annually revised.

“This is the first time reforming [tax regulation] since parliament started,” he said.

However, it will take more than tax breaks to get good cooperation from citizens and tax collectors alike, economist U Khine Htun said.

“The taxation system still needs many changes such as ethics between staffs and payers and a system to trace tax evaders,” he said. “Other areas such as banking system also need reform.”

2014 Union Tax Law

5 tax changes you need to know

  1. Commercial tax on luxury timber finished products halved to 25pc
  2. Commercial tax on polished precious stones products halved to 15pc
  3. The highest bracket for income tax is 20pc on annual earnings exceeding K20million, the lowest is 1pc for annual earnings of K500,000 or below
  4. The tax law will now be revised yearly along with the annual budget
  5. Commercial tax on first-time property purchases is now tiered from 5pc to 30pc
source: The Myanmar Times

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