Taxation is essential to provide governments with the funds needed to deliver the public goods and services necessary for the social and economic development of a country. However, in Myanmar, the levels of formal taxation are among the lowest in the world, according to the IMF. These low levels are the subject of regularly commentary in the public sphere, often accompanied by refrains about the need to raise the total level of tax collection. While these critiques rightly point to shortcomings in Myanmar’s tax administration, they are generally based on a narrow, formal understanding of tax that does not convey the wide array of complex and less formal revenue raising mechanisms used by the government and other actors in Myanmar. It is vital to understand this “tax burden” defined in a broad way, as policy decisions regarding taxation should be based on a thorough understanding of the on-the-ground realities. Without this broad, practical understanding, it is possible that efforts to raise more taxes could lead to unintended negative consequences, for example by overburdening low and middle income households who already pay significant taxes through informal mechanisms.
This project will outline the diversity of ways in which informal taxes, revenues, and in-kind payments are mobilised by the government and other actors in Myanmar. Informal taxation is often related to local circumstances and traditions, we attempt to provide four typologies of informal revenue raising (both in cash and kind), which are:
- Voluntary or semi-voluntary contributions from households and businesses to local organisations or ad-hoc groups that provide local infrastructure and service delivery.
- Coerced taxation, done without a legal basis, paid in cash or kind for the furtherance of public policy goals.
- Conflict-related taxation by government, military, ethnic, and other actors, including direct taxation and capture of rents, especially natural resource rents.
- Revenue raising from households and businesses through informal implementation of the formal taxation system (corruption, bribery, etc.).
This short paper will cover all relevant types of informal taxation (or tax-like methods used to raise revenues) and discuss the policy implications of the four informal revenue raising typologies and how they interact with formal taxation. Also it will include recommendations for areas of further research and suggestions about strategies for their implementation based on practical knowledge.