Published on Tuesday, 18 June 2013 21:26
Myanmar businesses have accused some construction firms of evading millions of dollars of income tax despite them being exempted from commercial tax.
The businessmen have argued that the commercial tax, which is collected even from basic food and newspaper companies, should be paid by construction firms who are benefitting from a boom in the industry.
Official figures show that there are now over 830 construction companies in Myanmar. Only less than 20 small construction firms were included in the list of 100 top tax payers of the financial year 2011-12, which is the first ever government report to disclose such information.
Businessmen questioned the fact that top construction firms such as Naing Group, Father Land, Mother Land, and Shine Construction were not on the list of top tax payers. These companies are constructing most of the major projects in downtown Yangon, where the strong demand for more housing has seen a construction boom in the once sleepy city.
“A good condominium room can cost around four to five billion kyats (US$4.4m to $5.5m). It’s clear big construction firms who built them are paying one tenth or one hundredth of the tax they have to pay to the government,” said a construction firm owner who did not want to be named.
Myanmar’s large construction firms have explained their case to the tax office claiming that their businesses actually suffered losses during the year, so they could not have to pay the full percentage of income tax.
Another construction businessman says he usually sells a condominium room for between 150 million kyats to 500 million kyats ($1.6m to $5.5m), giving him a net profit of between 10 to 50 percent on each sale. However, sale contracts of rooms and buildings are made at a much lower price than the actual deal to dodge taxes, sources from the real estate market have said.
Media companies also say the large construction firms are the ones who spend more money than other businesses in advertising both in newspapers and on TV.
A few weeks ago, Internal Revenue Department initiated a program to levy 2 percent advance income tax on exporters and importers as a measure to ensure that they pay. The traders responded angrily claiming that construction firms are also dodging taxes, and asked why the same does not apply to them. They even urged the revenue authorities to re-impose commercial tax on construction companies.
“Some major construction companies in Yangon have a very close relationship with government officials. I am not sure how much they bribe the senior officials, but I know they are paying lower-level officials with iPhones and iPads,” said a businessman close to the government.
Some have said that the Internal Revenue Department should form a separate team to scrutinize and regulate tax for construction firms.