Trends, challenges and Opportunities for Resource Mobilization in Myanmar for Sustainable Development

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Spencer Daniel Chambers
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1 Trends, challenges and Opportunities for Resource Mobilization in Myanmar for Sustainable Development

2 Outline Revenue and expenditure and Financing Trends Challenges for resource mobilization in Myanmar Opportunities Future Plan

Types Revenue and their Composition 120.00% 100.00% 4.50% 9.57% 1.20% 0.53% 1.28% 0.43% 0.19% 0.13% 10.27% 8.72% 10.36% 9.04% 9.66% 9.33% Percentage on Total Revenue 80.00% 60.00% 40.00% 58.70% 54.

3 Types Revenue and their Composition % % 4.50% 9.57% 1.20% 0.53% 1.28% 0.43% 0.19% 0.13% 10.27% 8.72% 10.36% 9.04% 9.66% 9.33% Percentage on Total Revenue 80.00% 60.00% 40.00% 58.70% 54.80% 49.79% 46.18% 44.56% 44.59% 43.82% 20.00% 27.02% 32.65% 39.72% 40.08% 43.82% 44.29% 43.00% 0.00% 0.21% 1.07% 1.24% 2.10% 2.16% 1.27% 3.73% (PA) (PA) (PA) (PA) (PA) (TA) BE Foreign Grants Tax Revenue State owned Economics Organizations Revenue Other Current revenue Capital revenue

4 Consolidated Public Sector Revenue as share of GDP Types of Revenue PA PA TA BE Grants 0.45% 0.45% 0.24% 0.63% Rent (tax levied on use of state own properties) 1.31% 1.27% 1.16% 0.83% Taxes 6.58% 7.27% 6.74% 5.74% Social contributions 0.07% 0.09% 0.10% 0.09% Other revenue (including SOE Revenue) 12.29% 10.92% 9.97% 8.81%

5 Function of Public Sector Expenditure (consolidated) 6,000, ,000, Kyats in Million 4,000, ,000, ,000, ,000, Function of Government

6 Public Sector Expenditure (consolidated) as Share of GDP 7.0% 6.0% Percentage of GDP 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

7 Ratio of Recurrent expense and Capital Expenditure 120% 100% 80% 35% 31% 31% 37% percentage 60% 40% 65% 69% 69% 63% 20% 0% (PA) (PA) (TA) (BE) Recurrent Expense Capital Expenditure

8 Financing for Government Expenditure Kyat in Billion /14 (PA) 2014/15 (PA) 2015/16 (PA) 2016/17 (PA) 2017/18 (TA) (BE) Domestic Financing Foreign Financing

9 Challenges in Resource Mobilization Tax Revenue are stagnant in percentage of GDP Inadequate taxpayer services State Owned Economic Organizations Revenue are declining. Some ministries are underspending Need to educate oversighting agencies to reform consequences for sound administration low levels of staff capability Weak of coordination and standardization of data interchange across various government systems Insufficient resources for reform activities Balancing between higher need of resources for MSDP and Debt Sustainability

10 opportunities Myanmar government have already set up Myanmar Sustainable Development Plan (MSDP) with 3 pillars, 5 goals and 28 Strategies and 251 Action Plans All Ministries are making efforts for the implementation of MSDP. Goal 2 Economic Stability & Strengthened Macroeconomic Management In order to achieve this goals, Ministry of Planning and Finance have organized Macroeconomic Management Sectoral Coordination Group In this group, MOPF and CBM have established five implementation teams, Central Bank and Ministry of Planning and Finance Coordination team Revenue Forecasting and Monitoring Team Medium Term Fiscal Framework Team Expenditure Management Team Financing and Risk Management Team

11 MSDP and PFM Reform Strategy Team MSDP PFM Reform Strategy CBM MoPF Coordination Team Revenue Forecasting and Monitoring Team MTFF Team Strategy 2.1: Effectively manage the exchange rate and balance of payments Strategy 2.2: Reduce inflation and maintain monetary stability Strategy 2.3: Increase domestic revenue mobilization through a fair, efficient and transparent taxation system Strategy 2.4: Strengthen public financial management to support stability and the efficient allocation of public resources Reviewing Current function of CBM and task sharing among CBM, Treasury Department, MEB and Budget Department for linking with Monetary and Fiscal Policy Applying simplified technologies Amendment of taxation laws (in accordance with fiscal policy) and regulations Opening medium taxpayers office functioning on SAS Centralization of processing, taxpayers services and telephone management Installation of required software Promote automatic import and export declaration system Deepen the Top Down budgeting and integrate with bottom up Budget requested by ministries

12 MSDP and PFM Reform Strategy (Con;) Team MSDP PFM Reform Strategy Expenditure Strategy 2.4: Strengthen public financial Establishment of fundamentals to spend capital Management MSDP Team & PFM Reform management Strategy (Con:) to support stability and the and current expenditures proportionally by Team MSDP PFM efficient Reform Strategy allocation Expenditure of public resources Management Team improving Strategy capital 2.4: Strengthen appraisal system public financial and management to support stability and the efficient allocation of public resources Strategy 2.5: Enhancing the efficiency and competitiveness Strategy 2.5: Enhancing of State Economic the efficiency Enterprises and Establishment monitoring of of capital fundamentals spending to spend capital and current competitiveness expenditures proportionally of State owned by improving out Applying capital appraisal simplified system technologies and monitoring of capital spending Economic To reduce Enterprises SG and exercise yearly estimate Reviewing To develop and simple arranging budget to enact monitoring and amend and laws and regulations (financial, procurement, budgetary law, public debt law, etc.) Establishment of Public Finance Management Academy Applying simplified technologies evaluation To develop framework simple to budget ministries monitoring and and evaluation framework to ministries and department along department with budget along planning with and budget management planning and guidelines To develop Public Finance Management Act To develop SEEs performance monitoring framework and make practice in SEEs Transparency of SEEs management guidelines To develop Public Finance Management Act Financing and Fiscal Risk Management Team To develop SEEs performance monitoring Strategy 2.4: Strengthen public financial management to support stability and the efficient allocation of public resources framework and make practice in SEEs Financing and Strengthen Fiscal Risk operations Strategy of 2.4: TD on Strengthen cash and public debt management financial along Strengthen with improving operations financial of TD reporting on cash and To debt Management develop Teamsimplified management technologies to in support collecting stability and compiling and the financial management information along and with reporting improving as well financial as develop financial reporting rules To promoting and harmonizing cash management and debt management Reviewing and arranging efficient to allocation enact and of amend public resources laws and regulations reporting (financial, procurement, budgetary law, public debt law, etc.) Implementation of Core Banking System in promoting and harmonizing cash management and debt management Implementation of Core Banking System in MEB

13 Term of reference for Revenue Forecasting Team To Collect comprehensive information on current and forecast revenue from the various business and / or revenue generating activities To Share information on and provide recommendations for appropriate methods for producing macroeconomic and revenue forecasts for different sectors of the economy To Assess the extent and impact of the losses from the revenue collection, including tax incentives To Share details information of best practice in obtaining supplementary evidence to offer insights into official data and to support economic and revenue forecasts

14 Term of reference for expenditure Management Team To systematically scrutinizes budget proposal and monitor the expenditure To reduce the gap between budget estimates and actual budget expenditure To examine the suggestion of public expenditure review and implement it To analyze the weak executing rate ministries in quarterly basis, find the problem and solution To provide suggestion in order to support the strengthening of assumption in MTFF To support effective implementation of project with the establishment of Project Bank

15 Options for Improving Resources Mobilization Expend tax base Rationalize Tax Incentives estimate costs, consolidate in one legislation, move to cost based and target by sector Consolidated list of incentives not available now. Legislative and administrative change needed to consolidate provision of incentives and ensure role of Revenue Forecasting Team in estimating costs. Rationalizing tax incentives could help to increase Myanmar s CIT tax productivity Enhance compliance focus by focusing on risk based audits. The audits and compliance is focus on tax return filings at offices that are not currently under self assessment. But More budget needed for enhanced compliance and audit capacity is a critical constraint. The revenue gains from this change are also difficult to quantify. Reduce Tax exemptions It may require legislative changes (Tax law need to amend) Reducing exemptions of commercial tax and specific good tax will improve tax productivity. Furthermore tax payment system need to be able to use electronic system such as mobile payment system. Tax administration need to be more effective. Other revenue also need to identify whether it is tax or non tax. Because it is more easy to manage tax revenue then non tax revenue. SEEs need to review and increased transparency and discussion on the sources and uses of these funds would enhance effective management. Set up Medium term Strategic Planning Set up framework for Monitoring and Evaluation System

16 Future Plan for effective Resource Mobilization Tax Administration and Procedures Law ( by 1 April 2019) Amendment of Income Tax Law VAT (Post 2021) System of Self Assessment Outcome by 2022 Risk based compliance improvement strategies for improving filing, payment, reporting etc. Enhance and develop to cover all taxpayers and all tax types Streamlined processes and procedures New processes using by technology Enhance capacity for expenditure forecasting and planning at line ministries; Establishment of Projects Bank Enhance automation of manual data management processes (starting with budget submission and then monitoring and evaluation)

17 Thank You

Nwe Nwe Win Director General Budget Department Ministry of Planning and Finance Myanmar

4 th High-Level Dialogue on Financing for Development in Asia and the Pacific Nwe Nwe Win Director General Budget Department Ministry of Planning and Finance Myanmar Bangkok, Thailand 28 th April, 2017