Facebook, which was introduced in Myanmar in late 2014, has since taken off and is now widely used as the country’s main social media platform. Due to its popularity, the volume of advertisements for goods and services on Facebook by businesses keen to engage the Myanmar audience has risen sharply. 

Yet, the IRD has not been able to levy taxes on the income generated by Facebook from those ads, they said.

Prior to 2014, there was no other platform for businesses to display advertisements other than the in the daily newspapers, magazines, billboards and TV channels. Back then, it was easier for the government to impose taxes on those companies for the income earned in exchange for ad space.

Things are more difficult on Facebook, though. “Policies for taxing social media platforms like Facebook for advertising revenue are currently not available under existing laws for the time being. However, it is necessary for the State to try and levy taxes on them in the future. It is also necessary for our citizens to see that all appropriate taxes that should be imposed are done so,” Director General of Internal Revenue Department U Min Htut said.

The government could potentially raise its revenues substantially by taxing the income received from advertising on social media platforms, blogs, mobile applications and websites. 

The number of Internet users in Myanmar has almost doubled from 600,000 in 2014 to 11 million in 2017 according to www.internetworldstats.com. During that period, business advertisements have moved online to engage more customers and capture new demand.

Rising competition

Meanwhile, many advertisement agencies have expanded online on platforms like Facebook since 2015. The agencies are now providing a variety of services to help companies market their goods and services online. Yet only a handful of them are active taxpayers. 

“Digital advertising and marketing services have a lot of potential to develop and grow in Myanmar. There are already many service providers in this space and competition is rising. As such, it is more difficult for the businesses which pay taxes to compete with those who don’t. So, there are many non-tax paying businesses in this space,” said Ma Chan Myae Khaing, head of Amara Marketing Agency.

The way she sees it, “if the government can impose taxes on all the businesses in the digital advertising and marketing business, not only will it be beneficial to the nation but also fair competition in the industry.” 

So far though, the government has yet to impose taxes on Facebook for advertising income generated in Myanmar.

“In the advertising market, ads on newspapers, TV channels and billboards have declined sharply. Most of the ads have moved to digital platforms. In Myanmar, Facebook benefits the most, while other media companies and ad agencies are mostly left out. I think the government should get a portion of Facebook’s profit. European nations have initiated tax policies on Facebook advertisements. The UK has already levied such taxes. In Myanmar, we need to find a way to do so,

too,” U Sein Win, Director of Myanmar Journalist Institute, said.

For example, Facebook had to pay 5.1 million pounds in 2015 and 4.1 million pounds in 2014 in corporate taxes in the UK, according to the Financial Times.

Tax policy needed

In addition, restricted alcohol and beer ads are now found on digital media like Facebook. The other issue is that the income generated by Facebook from the advertisements here is potentially challenging to tax. This is because cash flows are received by Facebook abroad from advertisers applying for ad space on online app stores by Google or Apple.

“Duties or taxes can be levied on goods that passed through Customs. But how can we levy taxes on services that cannot be seen? Our procedures need to be revised. People don’t realise that Facebook is selling a service to our country. The government doesn’t levy duties as they don’t pass through Customs. If imposed, Google or Microsoft or Facebook will have to pay. How do we tax the services provided on a digital medium? These issues must be discussed,” said U Tun Thura Thet, a member of the Digital Economy Development Committee.

As these represent a trade involving services, it is a must to pay commercial tax and withholding tax, he said.

To officially launch an advertisement on Facebook, Myanmar individuals and businesses can open a Facebook ad account and make payment via local banks. Likewise, for software purchases, one can download from the online app stores and pay via local banks too. But taxes have not been imposed on Facebook for those transactions, U Tun Thura Thet continued.

“There is an advantage if tax is going to be levied on Facebook and other firms. As it is a digital system, recording the transactions can be quite easy. If that advantage is used, it will be beneficial to the country.” he said.

So far, the IRD has made a statement stipulating that tax will be levied on pharmaceuticals and cosmetics advertisements on Facebook.

Source: https://www.mmtimes.com/news/effective-policy-needed-tax-income-digital-advertisements.html