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Military firms excluded from tax evasion law
Irrawaddy - January 7, 2011
Wai Moe – Burma's Internal Revenue Department has announced a new law targeting companies that evade tax as from Jan.1. However, the military-owned Union of Myanmar Economic Holdings Ltd (UMEHL) and several other government enterprises are still exempt from the regulation, said an official.
The director of the Internal Revenue Department – which is under the direction of the Ministry of Finance and Revenue – explained the new regulation at a press conference on Dec. 31 at the office of the Union of Myanmar Federation of Chambers of Commerce and Industry in Rangoon, according to local journalists.
Director Aung Moe Kyi of the department said that the "Withholding Tax" law is aimed at all businesses, traders, NGOs and individuals with assets higher than 300,000 kyat (US $300), and states that they are liable to pay taxes of between 3 and 20 percent of their profits or earnings.
"However, state organizations and the UMEHL are not included in the Withholding Tax regulation," Aung Moe Kyi said.
He did not clarify whether another military enterprise, the Myanmar Economic Corporation, is also excluded from the new tax regulation.
The military junta issued Decree 41/2010 on Withholding Tax on March 10, 2010, with a view to making it law by April last year.
However, the date for enforcement of the law was set as Jan. 1, 2011. The Internal Revenue Department also stated that only companies and individuals that comply with the regulation will be able to open legal bank accounts in Burma.
Since state enterprises and the UMEHL are excluded from the Withholding Tax regulation, a handful of military cronies who have stakes in massive state enterprises such as factories, mines, hydropower projects and state-owned buildings would appear to be exempt from the tax regulation too, said business sources in Rangoon.
The UMEHL was founded in 1990 under the 1950 Special Company Act, designated to support regimental welfare organizations, in-service and retired military personnel, and veteran organizations.
The military-run UMEHL has since enjoyed the privilege of tax exemption, analysts said, as it existed under the adjutant-general office of the military. Adjutant-General Maj-Gen Khin Zaw Oo currently chairs the organization.
However, from 2002 to 2010, the UMEHL was under the office of Military Ordnance, headed by Lt-Gen Tin Aye who is one of junta chief Snr-Gen Than Shwe's most trusted subordinates. Tin Aye took over at the UMEHL when Lt-Gen Win Myint, a former adjutant-general, was removed in 2002.
Although Khin Zaw Oo is officially chairman of the UMEHL, Tin Aye reportedly still oversees the bureau, according to military sources. The UMEHL is currently managing at least 51 firms directly or within partnerships.
Observers routinely criticize Burma as being one of the most mismanaged nations in the world with a barely functioning economy and a corrupt tax system. According to data from the Internal Revenue Department, only 1.09 percent of more than 50 million people in the country pay tax.
On Jan. 4, the opposition National League for Democracy (NLD) suggested in an economic analysis that systematic taxation throughout the nation would help to resolve Burma's spiraling inflation and financial problems.
The NLD also recommended that the rule of law be upheld and transparent, with accountable governance as well as equal business opportunities for all citizens in the country.
[Irrawaddy correspondents in Rangoon contributed to this story.]
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