Swe Zaw Oo narrates a perspective on the prevalence of tax evasion in Myanmar’s cash-based economy.
The sleepy afternoon of a Yangon street is woken up by the penetrating sound of music blasted from a passing Shwe-Yin-Aye hawker cart. Nothing can help one fight off heat like a bowl of icy and creamy coconut sorbet-like dessert filled with sago, glutinous rice and white bread pieces. People run towards the cart, ready to devour this cheap, tasty local treat. The hawker looks severely sunburned in worn-out clothes that reek of sweat. More than ten bowls of Shwe-Yin-Aye are sold in less than an hour on that stretch of street. He deposits roughly 10,000 kyats ($8) into his rusty safe. Smiles are exchanged, and he moves on to the adjacent streets. When darkness falls, he goes home with a total not less than 150,000 kyats (~$100). He already knows how much he has earned from the sight of three missing bread loaves. His monthly income totals up to 3 million kyats (~$3000), which is two times the reported GDP per capita of Myanmar (World Bank, 2017) .
In Myanmar, cash is still king, and hawker shops are uncountable. Rolling carts and pop-up shops are extremely mobile, easy to assemble, and provide a great income source for the general population. Vendors sell everything from snacks and desserts to mixed-rice and produce, as well as accessories and more. These cash transactions may look small, with a bowl of Shwe-Yin-Aye costing 800 kyats ($0.8) and a plate of mixed-rice with one type of meat costing around 1,200 kyats (~$1). Yet, affordability means a large volume of sales. Small-cash transactions are happening at every corner of every street in Myanmar — unreported — with street hawkers, taxi & tutu drivers and the majority of small and medium businesses all conducted in cash. But, these are just small fish in a big sea of cash transactions. Beyond SMEs is the enormous cash generated from unregistered channels — created out of necessity and fuelled by greed — utilized by members of entertainment industry, border trade, real estate and government-service and so forth. The bottom-line is that these incomes are massive at the national level and sadly unreported. The public is avoiding — knowingly and unknowingly — millions in taxes, with The Economist declaring Myanmar as “one of the lowest tax takes in the world.”
On the other end, there are employees at registered companies and licensed businesses struggling to stay afloat with high personal and corporate tax rates— of 25% for an annual income level that is recognized as below the poverty line in most developed countries such as income of £15,000 in UK or less than 60% of median income (Gov.UK, 2015), $25,100 for a family household in the US (ASPE, 2018) and AUD 20,784 in Australia or 50% of median income (Poverty in Australia, 2018). With leaders determined to increase Myanmar’s national revenue by raising the tax rate year-by-year, the outlook is bleak for the portion of the population with registered and taxable income (aka white money). The higher the tax rate, the more people will falsify their reported incomes in order to avoid taxation. This can be done simply by carrying out financial transactions in physical cash, which leaves no trace. The much-needed national tax revenue will then be borne solely by those registered under the Internal Revenue Department. Statistics on GDP and income level could not pinpoint these loopholes as effectively as one might hope, as the country is still poor with an average income of $100 a month per person. Such representation might be statistically correct, but it is not useful to alleviate tax evasion.
Here is a country where the rich look poor and the poor look rich. Doing wrong is easier than doing right. A master’s degree brings less income than a red taxi. A Shwe-Yin-Aye hawker earns higher than a bank employee. Here is a million-dollar question. How shall we start taxing Shwe-Yin-Aye?