Myanmar urged to hike taxes to cut income gap

Economy October 10, 2018 01:00


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MYANMAR’S hope for narrowing its inequality gap cannot be realised if the government fails to spend more on key sectors such as education, health and social protection, according to a global index released by Oxfam International yesterday.

Myanmar ranks very close to the bottom in both global and regional indexes in “The Commitment to Reducing Inequality Index (CRII) 2018” report. 

Myanmar ranks 138th out of 157 countries globally, and 20th out of 23 countries in East Asia and Pacific region. 

Thailand stands much higher than its neighbour, ranking 74th globally and sixth in the region. The index ranked countries for their policies on social spending, taxation, and labour rights – three areas that Oxfam sees as critical to reducing inequality. 

It found Asia lags behind much of the rest of the world, with the majority of the region’s countries in the bottom third of the index and none in the top 10. Most governments across Asia have failed to improve health and social protection spending, labour policies, workers’ rights and minimum wages, and women’s rights. 

Mustafa Talpur, Oxfam’s inequality campaign lead for Asia, said in an interview that Myanmar should strike a good balance between tax collection and public spending so that it could close the huge inequality gap between the rich and the poor. “Myanmar relies on indirect taxes that hurt the poor more and create inequalities. It collects less overall revenue, and spends less on education, health and social protection than Thailand,” he said. 

According to Talpur, Myanmar’s tax revenue is about 4 per cent lower than in Thailand, and relies more on non-tax revenue of about 11.2 per cent compared to Thailand’s 4.6 per cent. Thailand’s tax revenue is 17.8 per cent, more than double that of Myanmar, which is at only 7.5 per cent. 

“If you compare Myanmar with high income countries in terms of public spending and taxation, you will find a major difference. For Myanmar to expect a higher ranking in the years to come, the commitment of your government to reducing inequality is very critical,” he said.

According to the index, Myanmar ranks at the bottom in terms of the commitment to social spending in the region, and is also considered the world’s second-least committed country for enhancing social expenditures, he added.

Globally, European countries are the most committed to improving social spending, as nine out of the top 10 nations are members of the European Union, with Japan the only Asian country in that list as well as topping the regional index in that |category. 

In terms of social spending, Thailand stands fourth in the top 10 countries in the region, ahead of South Korea and China.

Talpur said the government must dramatically improve its efforts on progressive spending, taxation and workers’ pay and protection. He suggested creating a national plan to lay out how inequality would be reduced. Spending on public services and social protection also need to be increased, he said. 

“Protection of the workers is really important. Labour rights and minimum wages are as dominant as the progressivity of tax policies,” he said.

Another suggestion is to work together with international institutions to rapidly improve data on inequality and related policies, and to regularly monitor progress in reducing inequality. Talpur also advised analysing the impacts of any proposed policies. 

He called for greater investment in analysing the impacts of policy directions.

The index shows Singapore is now in the bottom 10 countries in the world at tackling inequality, ranking 149th despite being among the world’s wealthiest nations. This ranking is driven by a new indicator on the extent to which a country’s policies enable corporate tax dodging. Singapore also lacks a minimum wage for its workers, except for cleaners and security guards. 

The second edition of the Index improves on the methodology used last year by including new indicators on tax dodging and violence against women, and by relying on more up-to-date sources of data. 

Another interesting finding is that China spends more than twice as much of its budget on health than does India, and almost four times as much on welfare spending, showing a much greater commitment to tackling the gap between rich and poor.