Civil society organisations have voiced concern about new rules that will bring them into the tax system, warning it could place an unfair burden on small organisations and limit their operations.
The government says CSOs, as they are also known, must register with the Internal Revenue Department from next month and are now legally obliged to disclose their funding sources.
The move is aimed at preventing money laundering and stopping terrorist groups using nonprofits to fund their activities, said Swe Swe Khaing, director of the IRD’s tax reform division.
“In other countries, non-profit organisations have to register at tax departments,” she told Myanmar Now.
Myanmar’s CSOs perform a number of vital services where the state is unable or unwilling to help, including providing aid in conflict areas, giving medical care, supporting labour rights, and preventing communal violence.
CSO leaders fear the new rules will create a large amount of red tape and an extra financial burden for groups already running on tiny budgets with limited staff.
“We’re concerned this new instruction will be more harmful than helpful, and this could potentially limit how CSOs function,” said Aung Thu Nyein, director of international relations for the Institute for Strategy and Policy Myanmar, a think tank.
“I’m assuming there’ll be more inspections of the finances… the guidelines now say we need to submit annual reports to the General Administration Department and the IRD,” he added.
“It seems they want to start taxing the funding circulating within the organisations,” said Moe Moe Tun, of the Myanmar Alliance for Transparency and Accountability, a network of over 450 CSOs.
Groups with a focus on education, healthcare, poverty or natural disasters will be exempt from paying tax on funds donated to them. Religious organisations will also benefit from the exemption.
But CSOs classed as “advocacy groups” will have to pay tax if the IRD determines they have made a “profit” based on their tax return. Advocacy groups include those working in human rights, women’s rights, and labour and land rights.
Myanmar has 1,142 registered local nonprofits and 150 registered international NGOs, according to General Administration Department figures.
The finance ministry said making CSOs submit tax returns would also promote transparency around tax benefits and prevent people in the organisations misappropriating funds.
The Financial Action Task Force still includes Myanmar on its grey list, meaning it is not considered to actively support money laundering but needs to do more work to prevent it.
The Asia-Pacific Group on Money Laundering has said Myanmar needs to keep records on the funding and expenditures of nonprofits, finance minister Soe Win told a meeting of entrepreneurs last February.
Myanmar’s tax revenue is less than 5% of its GDP, the lowest rate in the ASEAN region, according to the IRD.
Individual income taxes are one of the country’s biggest sources of tax. The IRD already makes about 10bn kyat from income taxes taken from CSO employees, IRD director general Min Htut said in March.
Swe Swe Khaing said the tax CSOs pay from next month will depend on the source of funding and how the money is spent.
UN-supported organisations will receive an exemption on paying income tax on employees’ salaries, she said.
Aung Thu Nyein said his think tank already pays tax on its employees’ incomes. “But if the income received by the organisation is taxed, I think it would impose a burden on us,” he said.
