MYANMAR plans to offer an indefinite tax exemption to businesses that export 100 per cent of output, in a bid to boost the country’s exports and tackle a widening current-account deficit.
Aung Naing Oo, director-general of the Directorate of Investment and Company Administration (DICA), announced that the waiver would be for life under new investment policies. According to Aung Naing Oo, any business approved by the Myanmar Investment Commission would be allowed to enjoy multiple tax exemptions, regardless of their nature. “The new regulations look to support the current national objectives, which means refining those privileges to better suit exporters,” the director-general said.
“It’s not going to be three years. If they want 10 years, 20 years or 50 years, they will get full tax exemptions as long as all of their products are for export. For example, other businesses that import raw materials will need to pay customs duties. But exporters that have found a place in the international market will get refunds equivalent to the amount they paid [in taxes] while importing raw materials,” said Aung Naing Oo.
An official at DICA disclosed that the exemptions would be extended to both local and foreign-owned businesses. “Regardless of the location of factories and ownership, whether locally- or foreign-owned, the factories are entitled to enjoy tax exemptions for an unlimited period, as long as they export all the products from their factories,” said the official who asked not to be named.
Myanmar is in the process of enacting a new investment law, which will combine the Myanmar Citizens Investment Law and the Foreign Investment Law. Titled “The Investment Law of the Republic of the Union of Myanmar”, the law was drafted in cooperation with the World Bank’s financial arm, the International Finance Corporation.
One of its main aims is to facilitate investment in the country where the per-capita income of US$1,200 (Bt41,700) in 2014, was below that of most countries. To achieve that, investment constraints must be cleared so more investment leads to the creation of new jobs.
Myanmar is in dire need of export-oriented investment, as its current account deficit has kept widening due to growing imports.
In the 2015-16 fiscal year, Myanmar’s exports increased only marginally but imports grew more than 10 per cent as vigorous economic growth spurred demand for consumer and capital goods. Due to the huge trade deficit, the current account deficit widened to 8.3 per cent of GDP. Asian Development Bank expects the deficit to stay as high as 7.7 per cent in the 2016-17 fiscal year despite an increase in foreign direct investment. The widening current account deficit contributed to a 26-per-cent depreciation of the kyat against US dollar during April-December 2015. In the first seven months of this year, the kyat appreciated by nearly 11 per cent.