Tax Reform

Introduction

  1. The government of Myanmar is initiating several reforms in different government sectors and the Internal Revenue Department is also undertaking Tax Reform activities with a great momentum since 2011-2012 financial year and, has successfully implement the first phase of the Reform Journey. Based on the successes and lessons learnt, the second phase of reform programme from 2017-2018 financial year to 2021-2022 financial year has been developed and implementations have started.
  2. With the process of transition to modern democracy, Myanmar has adopted Framework for Economic & Social Reform and Tax Reform is one of the 10 areas of reform in the country.With the Public Financial Management Reform Strategy supported by World Bank and Development Partners, Internal Revenue Department commenced Tax Policy & Tax Administration Reform.
  3. The goals of Tax Administration Reform are to increase Tax to GDP ratio and to change to modern tax administration. In order to collect revenue without any gap and to support stabilizing the financial situation of the government, tax reform activities were undertaken through the following four objectives:
  • Maximize Revenue
  • Broaden the tax base
  • Maintain and improve compliance
  • Modernize Tax administration
Tax-to-GDP ratio

     4. Myanmar has the lowest Tax-to-GDP ration in ASEAN. The ratio is at 3 to 5pc. Thus tax system needs to be reformed.Now the aim is to reach the Tax-to-GDP ratio above (15%).

Modern Tax Administration

      5.  Modern Tax Administration includes the change to the self-assessment system (SAS) from official assessment system, the change to value added tax (VAT) and specific commodity tax (SCT) from commercial tax.

      6.  Tax Administration in Myanmar before 2011 is characterized by  

                   -   low capacity in the tax administration

                   -   low level of compliance in the taxpayers

                   -   Outdated tax policies, laws and procedures

       7.  Thus, Internal Revenue Department sets a vision “We must be an organization that acts with integrity and is recognized internationally as a highly effective tax administration”. Internal Revenue Department also sets a mission “To make taxpayers pay tax as good citizens, by delivering quality service in order to maximize revenue for the prosperity of the people.”

        8.   Reform activities which are underway according to Strategic Reform Program are

  • HR Reform
  • Tax Policy Reform
  • Legal Reform
  • DRD Reform
  • OMD Reform
  • ICT Reform
  • MTO1 Reform
  • Administrative Reform

Legislative framework reform

  • Enactment of Specific Goods Tax
  • Drafting Tax Administration Procedure Law
  • Drafting New Income Tax Law
  • Amendment of tax laws
  • Enactment of Value Added Tax

Restructuring of the Department

  • Change from Tax-typed to Functional-typed organization
  • Categorize taxpayer
    • Large Taxpayers
    • Medium Taxpayers
    • Small Taxpayers
  • Offices established according to the categories of taxpayers
    • Large Taxpayer Office (1-4-2014)
    • Medium Taxpayer Office MTO 1/2/3
    • Small Taxpayer Office STO

Modernize assessment processes

  • Commencement of self-assessment system (SAS)
  • SAS was successfully implemented in LTOs
  • Implementation of SAS to be continued in MTOs
  • VAT implementation from 2016 financial year onwards

Utilize Technology

  • Change to the system which maximizes the use of information technology (IT) in place of paper-based system
  • Recruit a long-term ICT International Expert for an integrated technology platform in IRD
  • Prioritize to provide adequate computers to all staffin IRD nationwide
  • Purchasing a Mini Data Centre and combine with Integrated Tax Administration System (ITAS) to provide Tax Services

Approaches to Service and Enforcement

  • Establishment of Taxpayer Service Units
  • Educate the taxpayers on self-assessment
  • Tax Audit and Collection of taxpayers’ information
  • Programs to assist in capacity building
    • Establish development programs to assist in capacity building, technical and legal support and disputes resolution processes

Develop our staff

  • Explaining the staff about the tax reform program and discussing
  • Provide Trainings and seek technical assistance to raise the capacity of staff
  • Get technical advice from International Advisors to enable LTO work on the processes effectively
  • Find approaches to provide the staff with better facilities

Management of Reforms

  • Development of governance framework
  • Setting up Reform Steering Committee
  • Setting up Tax Reform Program Steering Committee
  • Setting up Tax Reform Project Management Unit
  • Submission of Project Reports on progress

Increase transparency and accountability

  • Transparency in planning, reporting and monitoring system
  • Effectiveness in internal audit function
International Assistance

       9.   International assistance supporting the IRD reform programare given by the development partners:- IMF, US Treasury Office of Technical Assistance (US-OTA), the World Bank (WB), JICA, ADB, Norwegian Agency for Development Cooperation (NORAD)and Department for International Development (DFID) - provides technical assistance, assigns resident advisors, training needs and necessary funding (loan/ grant).

Setting up the Large Taxpayer Office (LTO)

     10.   As a pilot project of tax reform program, Large Taxpayer Office is established for the largest taxpayers in Myanmar.

Purpose

     11.    Purpose of the establishment of LTO

  • To introduce International Good Practices in Tax Administration
  • To focus on major contributors to government tax revenue
  • To be a model office for IRD that orients and implements tax reform program of Internal Revenue Department (IRD)
Uniqueness

     12.    What makes LTO unique-

  • First reform project to implement
  • First Office practicing Self-Assessment System (SAS)
  • First Office using function-based system

     13.    Taxpayers' obligations under SAS

  • Calculation of the amount of tax due using tax returns
  • Timely Filing of Tax Returns
  • Timely payment of tax
  • Keeping books and records

     14.    LTO's services

  • Taxpayer education
  • Stakeholders meetings
  • Workshops

     15.    Benefits

  • Limited or no contact with tax offices
  • Certainty of tax payment and tax planning
  • Assessment is done at the time of filing
  • Reduce time and cost
  • Better compliance
  • Improve trust between LTO and large taxpayers.

 

Setting up the Medium Taxpayer Office (LTO)

      16.   This is set up based on the functions and processes of the LTO for the taxpayer companies that are paying a large amount of taxes and the aim is to provide services efficiently.

Purpose

      17.    Purpose of the establishment of MTO1

  • To introduce International Good Practices
  • To focus on medium contributors to government tax revenue
Uniqueness

      18.     What makes MTO unique -

  • Office practicing Self-Assessment System (SAS)
  • Office using function-based system

       19.     Taxpayers' obligations under SAS

  • Calculation of the amount of tax due using tax returns
  • Timely Filing of Tax Returns
  • Timely payment of tax
  • Keeping books and records

      20.     MTO's services

  • Taxpayer education
  • Conduct stakeholders’ meetings
  • Conduct workshops

       21.     Benefits

  • Limited or no contact with tax payers from MTO1
  • Certainty of tax payment and tax planning
  • Assessment is done at the time of filing
  • Reduce time and cost
  • Better compliance
  • Improve trust between MTO1 and large taxpayers.
Conclusion

      22.   Reforms are significant and Internal Revenue Department has accelerated the reform program since 2013-14 financial year. In accordance with Tax Reform Strategy, reforms are to be successful in 2014-2020. The Internal Revenue Department, when compare to the nations in the the region and world, it aims to increase the very low Tax-to-GDP ratio can promote accountability, Accountable and open and transparent, which aims to become a modern Customs risky tax reforms have been implemented by dynamically momentum. The efforts of tax officials are also significant as it is seen. The contribution of the tax officials and the cooperation of taxpaying public can lead and make the successful modernized tax administration achieve soonest.