Myanmar tycoons race to file income declarations amid crackdown

Myanmar tycoons race to file income declarations amid crackdown
File image of a Buddhist monk walks at the shwedagon pagoda in Yangon on August 7, 2014

THE GOVERNMENT board in charge of monitoring tax collection is receiving a rising number of income declarations from the country's wealthy elite following its warning that they could face lengthy prison terms if they fail to pay taxes owed to the state, a member of the board said.

The number of income declarations it is receiving from the country's tycoons is rising every day, said Thein Aung, a member of the Board for Scrutinising and Monitoring Tax Collection said on the weekend.

Tycoons who are cronies of the government or the previous junta can no longer use their connections to avoid paying taxes, he said in response to questions from reporters.

"We are preparing to take action against the business owners who fail to deliver income declarations, but so far we've received many declarations, especially from the massive enterprises," Thein Aung added.

Those who do not submit income declarations will be considered tax dodgers and they will be investigated and prosecuted if found to be in violation of the law, he said.

Political and economics columnist Aung Chain Bwar pointed out that under the military tycoons could choose between bribing tax officials or paying taxes, and that this impunity corrupted the tax-collection system and created a tradition of evasion.

Those days are over, said Thein Aung, who is also a former deputy director general of Internal Revenue Department. "All legal options open will be taken against tax dodgers," he said.

The board is taking a two-stage approach to cracking down on tax evasion. The first phase is educational and the second is enforcement, Thein Aung said.

Min Htut, director general of the Internal Revenue Department, said that about 60 "frequent" tax dodgers had been warned already that they face up to 10 years in jail if - after the end of the education period - they are found to have violated the law.

Aung Chain Bwar said it had been common practice in Myanmar for companies to keep four balance sheets. They kept the one showing the true profit and loss of their businesses to themselves and shared a second with auditors.

The third was submitted to the government, while the fourth was kept on hand for surprise checks, Aung Chain Bwar said, adding that the final one was used to slip through the tax-collection system.

Aung Chain Bwar said that money derived from criminal activity was both abundant in Myanmar and tax-free.

Most of it flows to Myanmar's wealthiest people, he said, suggesting that they are living the highlife off proceeds derived from crime, such as the narcotics trade, timber smuggling and money laundering.

Only half of the country's more than 30,000 companies bother to pay tax regularly, Min Htut said.

He also said that firms with track records for tax evasion were most often developers or conglomerates and that the country's largest business association - the Union of Myanmar Federation of Chambers of Commerce and Industry - counted these criminals among its members.

Violations of the tax code and the related corruption cases can be handled with the Income Tax Law and Commercial Tax Law, officials said.

"We are ready to start taking action after the education period ends," said Thura Thaung Lwin, chairperson of the tax collection board. He said his board had a responsibility to ensure the rule of law without bias.

The current government has so far failed to eradicate tax avoidance, despite its pledges to do so. The wealth gap remains as enormous as it was before President Thein Sein took office in 2011, analysts say.

The working poor and lower middle class have benefitted the least from the reforms implemented by the former general, some economists have said.

Business owner Dr Soe Htun expressed skepticism about whether a crackdown on tax evasion could change a culture of tax avoidance overnight, saying that it was so deeply embedded in Myanmar culture that even some of those who drafted the laws had no respect for them.

"Have those who drafted taxation policies and rates been regular taxpayers themselves?" he asked.

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