RANGOON — Domestic and international nongovernmental organizations (NGOs) in Burma, including the UN, will be subject to the military regime's newly introduced system of Withholding Tax, according to sources in Rangoon.
An official from the Internal Revenue Department (IRD) told The Irrawaddy that the new tax system, which took effect on Jan. 1, encompasses both NGOs and INGOs working inside the country.
“International organizations such as the UN, and domestic agencies such as the Free Funeral Service Society are subject to this new system. All organizations registered under the existing law will have to pay Withholding Tax at the IRD office when they purchase goods or implement activities,” said the IRD official.
When purchasing goods inside the country, importing goods or asking business companies to take care of development projects on their behalf, NGOs and INGOs will reportedly have to pay Withholding Tax.
“In fact, when buying goods from companies or asking them to implement development projects, the NGOs and INGOs are effectively paying tax for those companies,” explained the IRD official. “For example, if a social organization buys rice worth 10 million kyat [US $12,000] from a company, the organization has to pay the tax at the IRD office before it settles its account with the company. Since the tax is 3 percent, the organization will only have to pay 9.7 million kyat to the company together with the tax receipt.”
He said that, on the other hand, if a private company initiates a deal with an NGO or INGO to purchase goods or implement a project, that company has to pay the Withholding Tax.
The Withholding Tax rate will reportedly be between 3 and 20 percent of the value of the goods or services.
A Rangoon-based news reporter told The Irrawaddy that this new tax system will not only disturb NGOs and INGOs in their implementation of development projects, but will also hinder their emergency relief efforts.
“Let's say an INGO buys 100 tonnes of rice from a company to be transported urgently to the Cyclone Giri-affected area. That INGO has to run to the IRD office to pay Withholding Tax, fill out documents and following other unnecessary steps. It will delay the distribution of aid to victims. I think there should be exceptions for NGOs and INGOs, so they can accelerate their social activities,” said the reporter.
According to the regime's official statement, only 1.09 percent of a population of more than 50 million people in Burma pay tax.
Business companies close to or founded by the military generals' relatives and children reportedly enjoy either tax exemption or the right to avoid paying tax.
The Union of Myanmar Economic Holding Limited, a military-owned conglomerate, is one such business company that reportedly enjoys tax exemption.
Related article: “Military Firms Excluded from Tax Evasion Law”
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