TY - UNPB

T1 - Taxation and Income Distribution in Myanmar

T2 - Application of a New Computable General Equilibrium (CGE) Model

AU - Jensen, Henning Tarp

AU - Keogh-Brown, Marcus R.

AU - Tarp, Finn

PY - 2021

Y1 - 2021

N2 - Despite major public finance reform efforts over the last decade, Myanmarese publicfinances continue to be characterized by relative weakness in revenue collection, budget execution,and long-term sustainability. Myanmar is therefore in need of comprehensive public financereform. Two top priorities of the Myanmar Sustainable Development Plan are to establish a fairand efficient tax system to increase government revenues, and to ensure effective public financialmanagement. In this paper, we analyse the scope for fiscal tax reform to finance future MyanmarUnion budget deficits and lower the need for central bank financing. Specifically, we employ anewly developed dynamically recursive computable general equilibrium model for Myanmar toanalyse the economic efficiency and household income distribution impacts of employing four taxinstruments, including the expansion of existing commercial taxes, customs duties, and corporatetaxes, and the introduction of new secondary and tertiary education payroll taxes, to finance 2022–40 government budget deficits. Our results demonstrate that eliminating Myanmarese governmentbudget deficits could release savings for future capital accumulation and lead to net present valueGDP gains, regardless of tax instrument, but also that real household welfare losses will besubstantial and potentially persist throughout our 20-year horizon. While the payroll and enterprisetax instruments are identified as efficient and progressive, they are likely to suffer from weak taxbases, implying that commodity-focused tax instruments, including sales taxes and progressive butless efficient import tariffs, will need to continue to form the core of any comprehensive tax reformin Myanmar.

AB - Despite major public finance reform efforts over the last decade, Myanmarese publicfinances continue to be characterized by relative weakness in revenue collection, budget execution,and long-term sustainability. Myanmar is therefore in need of comprehensive public financereform. Two top priorities of the Myanmar Sustainable Development Plan are to establish a fairand efficient tax system to increase government revenues, and to ensure effective public financialmanagement. In this paper, we analyse the scope for fiscal tax reform to finance future MyanmarUnion budget deficits and lower the need for central bank financing. Specifically, we employ anewly developed dynamically recursive computable general equilibrium model for Myanmar toanalyse the economic efficiency and household income distribution impacts of employing four taxinstruments, including the expansion of existing commercial taxes, customs duties, and corporatetaxes, and the introduction of new secondary and tertiary education payroll taxes, to finance 2022–40 government budget deficits. Our results demonstrate that eliminating Myanmarese governmentbudget deficits could release savings for future capital accumulation and lead to net present valueGDP gains, regardless of tax instrument, but also that real household welfare losses will besubstantial and potentially persist throughout our 20-year horizon. While the payroll and enterprisetax instruments are identified as efficient and progressive, they are likely to suffer from weak taxbases, implying that commodity-focused tax instruments, including sales taxes and progressive butless efficient import tariffs, will need to continue to form the core of any comprehensive tax reformin Myanmar.

M3 - Working paper

VL - 2021

T3 - UNU WIDER Working Paper Series

BT - Taxation and Income Distribution in Myanmar

PB - UNU-WIDER

CY - Helsinki

ER -