Taxes and Tax Appeal in Myanmar
What is Tax?
1. A tax is money charged to a taxpayer, an individual or a legal entity, to support government spending and public expenditures. All countries have a tax system in place to pay for the functions of government. In terms of economics, taxation is the compulsory transfer of payment from households or businesses to the government. Taxes comprise direct and indirect taxes. Direct tax is paid to the government directly by the taxpayers such as income tax, corporate tax and property tax. Indirect taxes are levied on goods and services and these are transferable with consumers ultimately paying the tax. Examples of indirect taxes are Sales Tax, Value-added Tax, Goods and Services Tax and Customs Duties. The taxation process involves two primary players, taxpayers and the tax office. The taxpayer is responsible for paying taxes and the tax office is responsible for collecting taxes on behalf of the government.
When did tax start in Myanmar?
2. In Myanmar, during the Bagan dynasties, the citizens paid taxes and the authorities levied taxes. Those duties and responsibilities to levy taxes and pay taxes on both sides were stated in Razabiseka Adeikhtan (oath) and Singaha Taya Lay-pa, which are the basic concepts of taxation administration of Myanmar kings. In the ceremony of the king’s coronation, he was asked to rule his country according to the law and order in receiving public taxes, and in exploiting one-tenth of the public tax and govern his people with justice and mercy. In the periods of Bagan, Sagaing, Pin-ya, Inwa, Toungoo, Nyaung-Yan and Konbaung, taxes were levied throughout the period. The records of collecting taxes can be found in the inscriptions of Bagan. In those periods, paying taxes could be in the form of garments, copper or paddy. However, the rates of tax on land varied from region to region because different production rates depended on different kinds of soil and the attitudes of the local chief who levied taxes. In addition, taxes were collected on different resources such as gold, silver, ruby, topaz, white copper and bronze.
After the British annexation of the whole of Myanmar in 1886, the colonial administration was introduced by the British. Then, Division, Subdivision, Districts, Townships and Villages are divided to administer in Myanmar. In 1888, a financial commissioner was entrusted to control the revenue collection. The revenue collected from the respective townships was submitted to the central treasury in Yangon. The most important taxation under British rule was land tax and other taxes practised in the colonial period include Tha-tha-me-da Tax, Capitation Tax, Excise Tax and Municipal Tax.
After Independence, the Internal Revenue Department was established on 1-10-1972 to develop the new administration system by merging all separate departments. At the time of establishment, IRD collected ten types of tax listed as income tax, profit tax, trade tax, excise tax, Aung Ba Lay Thein Su tax, stamp duty, land tax, water tax and dam tax, In-Ai tax, and mineral tax.
After 1988, when the government changed to a market economy, to make the tax collection system more effective, five types of tax, namely land tax, water tax, embankment tax, excise tax and mineral tax were transferred to the General Administration Department. At the moment, IRD is responsible for collecting five types of taxes, namely income tax, commercial tax, specific goods tax, state lottery tax and stamp duty.
What are the different types of tax systems?
3. Tax systems are structured depending on the ability-to-pay principle. This principle states that taxes should be levied on people according to how well they can carry the burden. Three types of tax are listed as
(i) Proportional taxes
(ii) Regressive taxes
(iii) Progressive taxes
Proportional taxes also known as flat taxes require all taxpayers to pay the same fraction of their income whatever their level of income is. The tax rate doesn’t change whether income increases or decreases. The weak point in proportional taxes is that the gap between the rich and the poor is becoming higher as time passes by. Regressive taxes require high-income taxpayers to pay a smaller fraction of their income than low-income taxpayers. That means as income rises, the tax rate decreases. A regressive tax is practised by countries when collecting indirect taxes. No matter someone’s income level, he or she can purchase the product or services at the same price. Progressive taxes mean when income rises, the tax rate increases which means high-income taxpayers are required to pay a larger fraction of their income than low-income taxpayers. The tax rates differ based on the amount of income with a threshold. Many developing countries practice progressive income tax structures to alleviate poverty by redistributing wealth. Myanmar also practices progressive taxes, which means higher income levels are taxed at increased rates.
Who administers taxes in Myanmar?
4. The Internal Revenue Department is the tax agency which is authorized to collect different types of taxes in Myanmar. The Ministry of Planning and Finance merged the previously independent Profit Tax Department, Commercial Tax Department, Excise Department, State Lottery Department, Stamp Duty Department, Revenue Section of the General Administration Department, and the Office of the Financial Commissioner and originated the Internal Revenue Department on 1 October 1972, to oversee all tax assessments. Two methods of tax collection system practised by IRD are;
(i) Official Assessment System (OAS)
(ii) Self-Assessment System (SAS)
Under the Official Assessment System, the tax office makes assessments based on the facts provided by the taxpayer. That system puts a lot of authority in the hands of a tax officer as the individual tax officer is responsible for taxpayer service, tax audit and tax collection. According to human nature, their reluctance to pay tax out of their pocket, that system could lead to a lot of negotiations between tax authorities and taxpayers. Hence, IRD attempts to put the Self-Assessment System into practice as a part of their reform process. The four tax offices using the Self-Assessment System are the Large Taxpayers’ Office (1), (2) and Medium Taxpayers’ Office (1), (2). The tax collection of these offices is 80 per cent of the total tax collection. In a self-assessment system, taxpayers must calculate the amount of tax due from the income they receive or will receive and pay it within a specified period. In addition, quarterly tax return forms and annual tax return forms must be submitted on time within the prescribed time limit according to law. Taxpayers may request an extension of time if such timely filing is difficult. Taxpayers may inquire about matters related to tax laws in person, in writing, or by telephone at the Taxpayer Service Department of IRD.
What is a Tax Appeal?
5. Tax disputes occur when taxpayers disagree with the assessment order provided by tax authorities. When tax disputes occur, tax appeals become effective. Tax appeal is a common way to resolve any tax disagreements taxpayers have with the tax agency. Under a particular tax law, the right to tax appeal if one is dissatisfied with the assessment order is provided. Thus, tax appeals are a legal process by which taxpayers can challenge tax assessments or decisions made by tax authorities. Tax appeal aims to ensure fairness and accuracy in tax administration.
In the tax appeal process, there are two stages listed as
(i) Internal Review
(ii) External Review
An internal review is a tax appeal process where the dispute is reviewed by officials within the same tax authority or department that made the initial decision. This review is conducted within the tax agency or department and tax authorities reassess the original tax decision. Internal review is often quicker, less formal and cheaper than going through external channels. If the taxpayers reach satisfaction, they are not required to go through an external review. An external review is a tax appeal process which takes place outside the tax authority and involves an independent body or tribunal. If the tax dispute remains unresolved after the internal review, taxpayers can proceed to external review. The external review process is more impartial and formal. The judgment passed by the external body is binding on both the taxpayer and the tax authority. In some countries, the decision passed by such an external body is final and conclusive and in some countries, if the taxpayer remains dissatisfied, he can proceed to the highest jurisdiction in the country.
How was the Revenue Appellate Tribunal formed in Myanmar?
6. In Myanmar, tax appeal was introduced in 1954 and the Income Tax Tribunal was formed under subsection (a) of Section 5 of the Burma Income Tax Act and only income tax appeals were adjudicated at that time. In 1972, the Revenue Appellate Tribunal was formed by Notification 120 dated 23-10-1972 of the Ministry of Planning and Finance with four members including the Chairperson to hear and adjudicate not only income tax appeal cases but also appeals, revisions, reviews and references related to customs duties, excise duties and stamp duties. Subsequently, the Income Tax Tribunal was changed into the Revenue Appellate Tribunal. Later, the Revenue Appellate Tribunal was formed by Notification 12 dated 11-12-1976 of Cabinet in 1976, Notification 6/89 dated 28-7-1989 of Government of the Union of Myanmar in 1989, Notification 54/2017 dated 31-5-2017 of Government of Republic of the Union of Myanmar in 2017 respectively and cases were heard. The Tribunal was formed by Notifications of the Cabinet without legislation and cases were heard for a long time. In 2018, the Revenue Appellate Tribunal bill was submitted and the Law was enacted by Law 23 of Pyidaungsu Hluttaw on 1-8-2018.
7. The Revenue Appellate Tribunal has quasi-judicial power, it is constituted of experts and experienced persons in the fields of law, taxation, accounting and auditing per international standards to adjudicate cases filed to the Tribunal regarding revenues collected by the Union Government and such cases are being heard independently and adjudicated impartially. In the exercise of the power conferred by sub-section (a) of Section 4 of the Revenue Appellate Tribunal Law, the Tribunal comprising eight members including the Chairperson was formed and assigned by the Union Government Notification in 2020.
Which types of cases can be filed to the Tribunal?
8. Four types of cases can be filed to the Tribunal such as appeal, revision, review and reference.
Appeal
Appeal means an appeal filed to the Tribunal against an assessment order passed by any department responsible for collecting internal revenue or by the Customs department or against a final decision on an assessment order made by any government department or organization assigned by the Union Government through a notification from time to time. An appeal may be filed to the Revenue Appellate Tribunal using the form prescribed by the Tribunal within 90 days from the date of the receipt of the said order. Even though filing has not been made during the limitation period, the appeal may be accepted if there is sufficient cause.
Revision
Revision means a case re-filed by an aggrieved person to the Tribunal, to revise, with respect to issues of fact, against the order passed by the Tribunal. Revision may be filed to the Tribunal using the form prescribed by the Tribunal within 60 days from the date of the receipt of the decision of the Tribunal.
Review
Review means a case re-filed to the Tribunal by any person receiving the decision of the Tribunal, to review the decision. The power is conferred upon the Revenue Appellate Tribunal to review its decision under the law. Review may be filed to the Revenue Appellate Tribunal using the form prescribed by the Tribunal within 90 days from the date of the receipt of the decision of the Tribunal. Review may be filed to the Tribunal where there is reasonable ground following Rule 1, Order 47 of the Code of Civil Procedure.
Reference
Reference means a case referred to the Supreme Court of the Union regarding issues of law, after hearing it by the full bench. When the applicant or respondent applies for a reference or any issue arises to refer the case to the Supreme Court of the Union, the full bench shall decide whether it should be referred. Reference may be filed to the Tribunal using the form prescribed by the Tribunal within 60 days from the date of the receipt of the judgment of the Tribunal.
The role of the Revenue Appellate Tribunal
9. Notwithstanding anything in any existing laws, revenue appeals shall be filed and heard only under Revenue Appellate Tribunal Law, which is promulgated in section 41 of the Revenue Appellate Tribunal Law. Thus, an appeal against orders or decisions of all kinds of revenue (taxes, fees, licence fees, permit fees or fines), against all forms of revenue in the schedule (1) of Union Taxation Law and customs duties shall be submitted to the Revenue Appellate Tribunal in line with the rules. Cases submitted to the Tribunal have been heard and adjudicated independently under the law and for cases heard by the Tribunal, the decision on issues of fact is final.
10. To conclude, the location of the Revenue Appellate Tribunal and its office is Office No 57, north of Thirimantine Road, Ottarathiri Township. Anyone willing to file an “appeal”, everyone is welcome to reach the Revenue Appellate Tribunal office. RAT members and its staff have made earnest efforts to prevent revenue loss and provide the best service to every taxpayer. The Revenue Appellate Tribunal has strived to ensure justice, equality, the right of defence and the right of appeal for Myanmar citizens and taxpayers.
References
– The Internal Revenue Department website
– The Revenue Appellate Tribunal website
– Taxpayers’ Perception of Service of the Tax Office Under the Self-Assessment System
– Access to Tax Justice by Michael Walpole
– Revenues of Myanmar in the British Administration
By May Thu Htay
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