INDEPENDENT NEWS

Cablegate: Burma: Paying Taxes to the Dmv

Published: Mon 20 Oct 2003 09:20 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS RANGOON 001316
SIPDIS
SENSITIVE
STATE FOR EAP/BCLTV, EB
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA
E.O. 12958: N/A
TAGS: EFIN ECON PGOV BM
SUBJECT: BURMA: PAYING TAXES TO THE DMV
1. (SBU) Summary: In a nightmare bureaucratic scenario that
unites tax authorities, the department of motor vehicles, and
military intelligence, as of October 6th the Burmese
government is using a mandatory annual car registration
exercise to try and collect desperately needed tax revenue.
Tax collection has been a serious problem for GOB coffers as
taxpayer evasion, and tax collector corruption, have
conspired to keep explicit tax revenues at a minuscule 2-3
percent of GDP (per the government's inflated statistics).
This new strategy will collect some short-term funds, and may
punish a few scofflaws. However, it comes at a bad time
economically for consumers, further complicates an already
confusing taxation system, and does little to address the
serious problem of corruption among tax collectors. End
summary.
2. (SBU) A new taxation scheme, focusing on annual motor
vehicle registration by car owners, got underway on October
6. Those registering must prove that they paid income taxes
on the money they used to purchase the car -- no mean feat in
a country where paying income taxes often leads to more
negative government attention than not paying. If the owner
cannot provide this evidence, s/he will be assessed on the
spot a tax of 15 percent of the current market value of the
car -- as set arbitrarily by Internal Revenue Department
(IRD) -- not of the original purchase price. Though 15
percent is much lower than the normal maximum 50 percent
income tax rate, in fact the amount of taxes paid will be
quite high in kyat terms. Car values have skyrocketed,
alongside other "assets," due to a weak kyat and rampant
inflation in recent years. Thus, ten years ago if someone
had 400,000 kyat in income to buy a car, s/he would have
owed, at the highest income tax rate, 200,000 kyat as income
tax. The same car now is being valued by the IRD at 10
million kyat -- a 1.5 million kyat, or $1,700 at current
exchange rate, tax liability under the new scheme.
3. (SBU) This strategy will punish some tax evaders; however,
it does little to address other aspects of the revenue
collection problem -- particularly corruption. Though 300
military intelligence officials have purportedly been trained
to manage this new car tax scheme, these officers will likely
be only slightly less crooked than the brazenly venal, and
incompetent, Road Transport Administration Department staff
that normally oversees car registration and sales tax
matters. Anecdotes are rolling in already of payoffs made
directly to the adjudicating official in exchange for a clean
bill of health. We've also heard several complaints that
everyone, even those who can provide the proper paperwork, is
being assessed the punitive tax.
4. (SBU) The timing of the move is not ideal. The Burmese
economy is scraping bottom, the private banking system has
collapsed, and there is little formal commerce and nearly
zero domestic investment. The government is doing nothing to
stimulate economic activity or thoughtfully reform the
troubled tax system. Adding a new, large burden on the
country's mostly middle class car owners will likely take
even more kyat out of circulation as people are forced to
tighten their longyis to pay the new taxes.
Martinez
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