TAX COLLECTION PROCEDURES IMPROVING, BUT MORE PROGRESS NEEDED

NEWS

As the tax to GDP ratio for Myanmar is lower than that of its regional peers; successive governments have prioritised more efficient tax collection. Efforts to reform tax collection began in 2012 under former president U Thein Sein. The aim of the effort was to put in place a modern tax administration system. The first phase of the tax reform plan was carried out from 2012 to 2017, with the Internal Revenue Department (IRD) drafting regulations for tax reform. During the period, the country switched from the official assessment system (OAS) of paying taxes to the self-assessment system (SAS). In tax administration reform, the department changed from a paper-based administration system to IT-based system. The adoption of the SAS was one of the main recommendations from the International Monetary Fund and World Bank in terms of change in Myanmar’s tax system.

(Source: The Myanmar Times, December 7, 2018)

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RESEARCH VIEW

A comprehensive reform strategy will be needed to tackle the multiple bottlenecks and administrative difficulties hampering tax collection and compliance. The steps taken to establish a Large Taxpayer Unit and reform/expand the taxpayer registration system should strengthen Myanmar’s tax collection capacity, but further reforms should be added to the agenda. As reported in World Banks’s Public Financial Management Performance Report, “a dedicated set of laws and legislation on tax and customs administration is lacking.”  Clear guidelines and more training should be provided to the tax collectors who are responsible for the case-by-case assessment of tax liabilities. Assessment of tax liabilities is often conducted using indicators rather than audited information provided by the taxpayers, increasing taxpayers’ uncertainty over their liabilities. Moreover, the modernization of the tax administration should include a shift toward the use of selective audit tools, as opposed to the current assessment system, which increases tax collection costs and generates ample ground for corruption and rent-seeking. As a complement to this reform, the ongoing taxpayer education programs should be extended and strengthened. 

MOST STRATEGICALLY LOCATED COUNTRIES IN ASIA

            NEWS

Geography plays a huge role in any nation’s success. From natural disaster risk to trade accessibility, location usually helps define growth prospects. For example, landlocked nations are severely limited by their lack of access to the ocean. They often rely on a neighboring country’s port to access global shipping lanes. As such, industrialization proves very difficult for them. Likewise, places like Indonesia and the Philippines are located entirely in high earthquake risk zones. Nations prone to flooding, hurricanes and other disasters are generally less developed because of these occasional setbacks. Yet some countries are more fortunate than others. We can’t change a nation’s spot on the map – but you can choose where to invest.

(Source: Invest Asian, December 10, 2018)

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RESEARCH VIEW

Occupying a strategic position at the crossroads of India, China and Thailand, and now in its seventh year of sweeping economic liberalisation and political transition, Myanmar remains one of the fastest-growing economies in Southeast Asia. Although recent GDP growth has moderated from the double-digit highs of the early 2000s, it has remained above 5% for more than 25 years, supported by robust natural resource exports, steady foreign direct investment (FDI), rising incomes and private consumption, and rapid expansion of the industrial and services sectors. External headwinds and internal conflict have dampened the near-term outlook; however, the country’s long-term economic outlook remains positive, with rising investment in transport and power infrastructure expected to drive GDP and industrial growth, supported by a sharp increase in personal incomes and consumer spending.

FOREIGN INVESTMENT IN MYANMAR ON THE RISE: DEPUTY MINISTER FOR PLANNING AND FINANCE

NEWS

Myanmar’s deputy minister for planning and finance said foreign investment in Myanmar is on the rise, stating the country has so far attracted more than $12 billion in foreign investment since the National League for Democracy (NLD) government took office in 2016. U Set Aung told the country’s Lower House on Tuesday that from 2016 to 2018, the Southeast Asian country has seen 360 foreign investments totaling $12.37 billion in 10 sectors ranging from agriculture to industry to tourism. Since the enactment of the 1988 Investment Law, Myanmar has accepted 1,110 investments valuing a total of $63.72 billion as of March 2016. “We would say that there is an increase in FDI (Foreign Direct Investment) because the amount of investment allowed by the new [NLD] government from April 2016 to March 2018 amounts to 16.25% of the total FDI from 1988 to 2018 March,” he said.

(Source: The Irrawaddy, December 10, 2018)

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RESEARCH VIEW

The country’s economic activity will be buttressed by sustained FDI inflows, improving investment sentiment, and continuing strong growth in garment exports and domestic consumption. Additionally, infrastructure construction activities related to upgrading connectivity, and electricity infrastructure such as gas-to-power plants and upgrading the Yangon-Mandalay expressway, will help maintain the growth momentum. According to the Ministry of Planning and Finance, the total FDI approvals in FY2017/18 dropped to USD5.7 billion, compared to USD6.7 billion the previous year, as a result of no applications in the oil and gas sector, and a sharp drop in transport and communication sector. Nonetheless, on a positive note, there has been a diversification of approved FDI projects in FY2017/18 with real estate projects growing by 51.7%. Colliers believes that Myanmar’s real estate growth prospects remain promising overall. Investor interest, particularly from China, Japan, Korea and Singapore, among others, is robust. While Yangon remains a key investment destination, Mandalay is also becoming more apparent on the radar. Chinese investors have special considerations in Mandalay given its long-standing trading ties to China’s Yunnan Province. These have been reinforced with three other strategic locations bordering the region for China’s Belt and Road Initiative. Meanwhile, in Yangon, foreign developers are attracted to both stand-alone and integrated projects, with some even looking at massive township-size developments.