Thet Mon Htun
The government's plan to introduce tax on interest earned on savings accounts nationwide has caused anxiety.
The announcement followed an imposition of a 3-per-cent tax on gold purchases, another common savings tool.
The plans is seen as throwing oil on the fire as the economy is far from healthy with low growth and high inflation.
People’s purchasing power will inevitably suffer as a result.
Proponents of the change say it is fair since many countries tax interest.
But critics said that the government should earn more tax revenue from large companies: many of which are known not to pay a fair share of taxes, as well as those with privileges on exporting natural resources.
The authorities claimed that the tax levied would be for big savers, with small accounts left unaffected. Director general of the domestic revenue department Min Htut said the regulation could be introduced next year.
Two days later, the plan was withdrawn by the authorities after an outcry on social network.
The government said it had shelved the plan for its five-year term.
Khin Maung Zaw, the research director for the Centre for Strategic and International Studies (CSIS), said: “According to Section 33 of the Savings Banks Law, interest accrued from saving bank accounts cannot be taxed. What is more, a citizen should not be taxed again if they have paid taxes for different income sources. Citizens have to be protected from double taxation.”
Section 33 of the Savings Banks Law prescribes: “Interest accrued on a savings bank account and savings certificates shall not be liable to income tax or profit tax. Nor shall interest be taken into account when reckoning the assessable total income.”
It was enforced in June 1992 under the State Law and Order Restoration Council of military dictator Than Shwe.
Researcher Thet Tun is a candidate for No.6 constituency in Yangon Region for the Upper House representing the National Development Party in the April 1 by-election. He said: “I don’t know who the economic adviser to the government is. A Burmese adviser would not suggest collecting tax on interest earned on savings. If the adviser is foreign, they might suggest the strategy based on their international experiences. There would be many problems if the strategy doesn’t fit with the conditions. Such a strategic plan will have many weaknesses.”
The economy has inflation of more than 11 per cent annually with interest hovering around 8 per cent, meaning savings are losing their value.
Many families hold bank accounts although it is common to keep cash at home as financial institutions are distrusted.
On the other hand, banks are the only sound operating financial institution in Myanmar where other financial businesses are in their infancy.
The macroeconomic impact would be massive in monetary circulation if the plan was imposed.
Moreover, the government announced last week a plan to collect 3 per cent tax on gold purchases which will be enforced in April. This is seen as having another negative impact on the lower and middle income earners. Farmers traditionally buy gold after the harvest, often to sell it again next season.
Research Director of CSIS Khin Maung Zaw said: “Not only the dollar is the global currency. China and India are collecting gold as national reserves. If regulations are unfavourable here, gold will flow out of the country.”
A few days later, the parliamentary bill committee proposed that the gold tax should be lowered from 3 per cent to 1 per cent.
The anxiety continues.