Burma Tax System Lambasted by Human Rights Organization Report

The Chiang Mai, northern Thailand-based Network for Human Rights Documentation – Burma (ND-Burma), on September 1 in Bangkok released a scathing study of the tax system in Burma (also known as the Union of Myanmar).

The report, entitled “We have to give them so much that our stomachs are empty of food” The Hidden Impact of Burma’s Arbitrary & Corrupt Taxation, says that the Burmese military government uses the tax system to fund the bloated armed forces, while driving Burmese citizens, especially the rural poor, into abject poverty. (For the report see Doc 2010-19787; for an ND-Burma press release on the report see Doc 2010-19789.)

The report claims that the Burmese tax system is maintained with no regard for the needs or exigencies of individual households, businesses, or the broader economy. “In fact the system arises from the needs of Burma’s military state,” the report says. It is a “semi-medieval fiscal system,” the report says which violates “a raft of international treaties and norms.”

“Taxation arrangements are chaotic, arbitrary, in large part out of the control of central authorities, and singularly inefficient in either collecting sufficient tax revenues or in imposing reasonable and non-distortionary costs on productive enterprise,” said Sean Turnell, an economics professor at Sydney, Australia’s Macquarie University, as quoted in a September 8 report on www.irrawaddy.org, the website for The Irrawaddy, a newsmagazine published in Chiang Mai (in both English and Burmese) by Burmese exiles.

Turnell added that methods for assessing personal tax or household tax by self-appointed town council tax collectors are unorthodox, even “utterly bizarre.”

Among the allegation made in the report, based on interviews with 342 Burmese taxpayers between 2008 and 2010, is that the Burmese tax system is essentially a giant kleptocracy in which “money, land, goods, and labor” are arbitrarily demanded “in the name of taxation.”

Lead author Alison Vicary, also an economist at Macquarie, said that the Burmese tax system lacks transparency and accountability, and is both oppressive and illegitimate, with taxes paid directly into the pockets of corrupt officials.

“The agencies collecting taxes are actively involved in the control and suppression of the population. Much of the taxation that [is] actually collected at the local level is going to the incomes of local officials rather than to the central government,” she said, as quoted in a September 1 VOANews.com report.

Of particular concern is the arbitrary tax collection duties appropriated by anyone wearing a uniform (police, military, customs inspectors). The report claims that these taxes are essentially personal income grabs carried out by hungry, scavenging soldiers in

war-torn ethnic areas that appear nowhere in any public record. In part the situation is the direct result of Rangoon’s policy of limiting payment to soldiers, pushing them to use “tax collection” as means of survival, the report says.

Taxes and fees are randomly assessed on people at checkpoints on roads, rivers, and ports. In some cases, poor Burmese are forced to pay tolls to walk down a road they had earlier built through the payment of taxes in the form of labor, according to a September 2 report on www.mizzima.com, the website for Mizzima, an India and Thailand-based news service focusing on Burma, including underground reporting in Burma itself.

“This has many problems as the collection of taxes is associated with violence and in many cases egregious human rights abuses,” Vicary said, as quoted in the VOANews.com report.

In one documented instance in Kachin State (Burma’s northern most state), 18 distinct Rangoon-affiliated groups were demanding money and/or goods as tax at three “security” checkpoints, according to the www.irrawaddy.org report.

In another extreme example, Maung Chit Thoo, operations commander of the military junta-backed Democratic Karen Buddhist Army Brigade 999 demanded that all households in his district buy a specific photo of Maung and his wife, according to the www.mizzima.com report.

“People all over the world are dissatisfied and complain about the taxes they are obliged to pay. However, the [Burmese] military has transformed taxation from a routine and legitimate function of government into extortion and a tool of repression,” the report says.

In addition to the corrupt nature of the taxation, the system is also slowly crushing Burmese citizens. Poverty among the rural poor is ubiquitous, with only about 1.3 percent of Rangoon’s annual budget going to health and education. About 50 percent goes directly to the military, while much simply disappears, according to media reports.

Rangoon has also been accused of wasting huge amounts of money on expensive infrastructure, according to a September 6 report on www.theepochtimes.com, the website for The Epoch Times, a multi-language New York City-based newspaper focusing mainly on China. It was founded by supporters of Falun Gong, a Chinese spiritual movement strongly opposed by Beijing.

“This system of taxation is not fair, most taxes are not levied on [the] basis of income or profit, so what this means is that most of [the] taxes are lump sum, this means the poorest people in Burma appear to have the highest rates of taxation. This is particularly problematic in a basic agricultural society [where] people don’t have savings or even a bank account,” Vicary said, as quoted in the www.theepochtimes.com report.

“So when tax is levied they simply cannot pay, so one of the biggest problems in the system of taxation is that people are forced to borrow money at extremely high rates or sell their productive assets and property,” she added.

Subsistence farmers are reportedly known to receive tax bills in the form of over 50 percent of their annual crop.

“We don’t know when the Light Infantry Battalion (LIB) comes to collect taxes from our tea plantation, and we don’t have the right to ask them why. We get little benefit from our tea plantation each year and it’s just good enough to sustain us. We can’t save money from our tea plantation to pay for additional things. So if we have to pay 20,000 kyat for one acre, in a year we need 140,000 kyat in total. It’s very difficult to collect money and pay. They threaten us that if we would not pay, the LIB would seize our plantation,” said an unnamed farmer quoted in the report.

The Burmese education system (in which teachers’ salaries do not approach the cost of living), is also hindered by random taxation. According to an interview with a local parent carried out by the Palaung Women’s Organisation for its 2009 report Taxation for education in Nam Khan Township (Shan State), fees and the purchase of school supplies are required from the state despite the fact that the same supplies can be purchased from shops for much lower cost.

“When my child has to attend 5th standard, he has to go to another school, and I have to give them the school transfer document fee [of] 2,500 kyat, and the school fee for 5th standard [of] 9,000 kyat, and the exercise book fee of 1,500 kyat, and we have to buy more exercise books from the school as they couldn’t sell all [their] books (1,700 kyat), and we have to give for the stationary fee, the textbook fee and they are much higher than the private shops. I have to spend a lot of money for those fees, so, I have decided to drop out my child from the school and send him to go to work the rubber fields with his elder sister. His elder sister has already had to drop out from school when she was at 7th standard,” the parent said, as quoted in the www.mizzima.com report.

Other random taxes slapped on poor families include a 2007 levy imposed in Karen State by the Rangoon-backed Myanmar Woman’s Affairs Federation of 1,000 kyat on all families with girls (1,000 kyat per girl). In Kachin State in 2008, telephone users in Myitkyina Township whose number started with 25 had to pay a 550,000 kyat tax to restore service after it mysteriously stopped for those with that prefix, according to the www.mizzima.com report.

The arbitrariness and lack of accountability serves to add greatly to the burdens faced by Burmese people, especially the poor, said Cheery Zahau, human rights coordinator with the Human Rights Education Institute of Burma (located in Chiang Mia, Thailand).

“It [tax system] adds to the problems to the basic survival, they [Burmese people] cannot save money, they cannot, in many cases, send their children to school. They do not have enough money for hospitals, for health care anymore. So it makes the whole social

welfare collapse for the people; it becomes a burden for the people,” Zahau said, as quoted in the VOANews.com report.

Zahau specified forced labor, denial of education, and land confiscation, as the three major forms of human rights abuse facilitated by the tax system, adding that punishment for failure to pay is severe and that fear of the military is deep rooted among the rural population.

“People are paying tax under fear, and citizens are denied the right of information, and tax collection agencies use threats to collect tax as they go house to house when they visit villages, or communities, or send them warning letters that they must comply to demands,” she said, as quoted in the www.theepochtimes.com report.

The report also found that ethnicity dictated the degree to which taxation was applied. For example the Rohingya people of Arakan State were more likely than other groups to pay high taxes.

“Ethnicity is one determinant of taxation levels, with businesses owned by Rohingya being subject to higher levels of taxation. People are being targeted because of their ethnic group, such as at checkpoints where being taxed or fined can depend on the personal and ethnic relationship of the persons in charge of the individual checkpoint,” the report says (the Burmese government reportedly recognizes 135 distinct ethnic groups within the country).

Rangoon has scheduled a general election for November 7, and human rights activists reportedly claim that funds for the election are now being extorted as new taxes. Most outside observers, including Vicary, consider the elections to be a staged affair designed to strengthen the military junta’s claim to power, according to the report on www.theepochtimes.com report.

“We do not expect that people’s lives will improve after the elections planned. The military is poised to maintain control over the political life of the country. Its plan to transform the armed opposition groups into a border guard force and various militias will maintain the militarization of Burmese society – a system largely paid for through arbitrary taxation,” the report says.

Official figures for total tax revenue for the 2009-2010 financial year showed a small increase to $1.1 billion, according to the www.irrawaddy.com report, while customs duties slumped over 46 percent to $44 million.

“Although the junta is now accruing substantial earnings from natural gas exports, little appears to be finding its way into official government coffers. Anecdotal evidence suggests that extensive off-budget military spending has continued in recent years,” said a report by the Economist Intelligence Unit, quoted in the www.irrawaddy.com report.

ND-Burma reportedly commissioned economists from Macquarie University’s Burma Economic Watch publication to carry out the research behind the report. It was funded in part by two U.S. entities, the National Endowment for Democracy (in turn funded by Congress); and by the Open Society Institute (funded by George Soros).

Although begun as a study of the biggest threats to the country’s economic health and human rights, it quickly became focused on the tax system as a key pillar on which the corrupt regime stands. “None of us expected at the beginning of the exercise that we would end up focusing on taxation and its corruption,” said the authors, as quoted in the www.irrawaddy.com report.

Some areas of the country may have escaped scrutiny, however.

The report has had difficulty obtaining information on Burmese cities, according to Zahau. “The big cities have too many military intelligence” for comprehensive research, she said, as quoted in a September 2 report on www.dvb.no, the website of the Democratic Voice of Burma, a Burmese journalism organization located in Oslo.

Additionally, some areas under the control of ethnic armies were not included, she added, although the Democratic Karen Buddhist Army featured prominently in the description of arbitrary taxation (Karen – or Kayin - constitute about seven percent of Burma’s 50 million population, the third largest group after Shan, nine percent, and Bamar, 68 percent).

However an example of tax abuse in the urban sector includes a July decree that small and medium businesses pay their taxes for 2011 and 2012 in advance, lest they lose their business license, according to a July 8 report on www.mizzima.com.

The taxes had been collected quarterly, but would now be due two years in advance, according to a decree from the Rangoon city authority and the Internal Revenue Department.

“The township municipal committee told us we have to pay taxes for two years in advance by the end of the month,” said a beauty parlor owner, quoted in the www.mizzima.com report. “We had no other option as we have no alternative businesses. So we accumulated all our resources to pay these taxes,” added a tea shop owner.

The country has been ruled by a military junta since the 1962 coup under General Ne Win. Following two years of unrest beginning in 1988, the government finally agreed to free election in 1990. However as the opposition National League for Democracy, under the leadership of Nobel Prize winner (1991) Aung San Suu Kyi, was on the verge of a landslide victory, the military annulled the election and refused to step down. Suu Kyi has remained under house arrest for 14 of the last 20 years.