Key messages

• Jade and gemstone mining ranks among Myanmar’s most lucrative industries, generating as much as tens of billions of dollars annually. Yet government revenues capture only a small fraction of this value, and most citizens do not share in the sector’s potential benefits.
• The government selectively overtaxes the small portion of jade and gemstones passing through official channels, while companies avoid most payments by underreporting and undervaluing their production. Under the table payments to regulators and power brokers facilitate these and other forms of tax evasion.
• Improving revenue collection requires significant reform of the tax system, including revision of fiscal terms, restructuring of permitting and valuation processes, and strengthening of monitoring and oversight.

Jade and gemstones mined in Myanmar account for billions of dollars of the country’s annual GDP. However, tax collection remains limited relative to the value of the sector. Improving revenue collection will require significant reforms.

Low revenue realization results from flaws in Myanmar’s current fiscal framework, as well as high levels of corruption and informal taxation. Myanmar relies on over-taxation of the relatively small percentage of production marketed at semi-annual emporiums to generate the majority of government revenues.

Meanwhile, most jade and gemstone production by value goes untaxed or undertaxed. Based on data from the Myanmar Extractive Industries Transparency Initiative, it appears that as much as 59 percent to 74 percent of jade by volume could have gone unregistered in fiscal years 2014/15 and 2015/16. Production that is registered is dramatically undervalued; data indicate that companies declared and paid royalties on less than 1 percent of the likely value of jade and gemstone production. While the government does recoup some revenues through permit fees, this has not come without costs. Many companies have allegedly secured permits through bribes. This incentivizes officials to permit areas greatly exceeding the government’s supervisory capacity.

This report proposes several reforms for taxation of Myanmar’s jade and gemstone sector:

• Revise fiscal terms by establishing a clear and fair tax code; shifting from sales-based to production-based taxes; applying taxes uniformly across joint ventures and private concessions; strengthening ministry and parliamentary review of institutions charged with collecting revenues; and distinguishing between taxes on companies and taxes on small-scale and artisanal mining.
• Restructure valuation and permitting processes by adopting an open bidding process for all concessions; providing for multiple, independent and detailed valuations of jade and gemstones for the purpose of royalty payments; and barring company representatives from participating in adjudicating either permitting or valuation processes.
• Strengthen oversight by increasing monitoring of mining operations; developing an auditing unit; and levying appropriate penalties for permit and contract violations.