Source: Vientiane Times
Small and Medium Sized Enterprises (SMEs) in Laos must prepare for a new challenge when the government enforces the Law on Value Added Tax (VAT) next year.
Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy, told the National Assembly last week that the government would put the newly amended VAT Law into practice in 2019.
One of the intended goals of enforcing this law is to increase by at least 10 percent the number of SMEs that have bank accounts.
The existence of bank accounts provides a reference for tax officials when calculating the amount of VAT a business owes.
At present, most SMEs do not have bank accounts and pay VAT based on assumptions made by tax officials, which policy makers see as being the main cause of revenue loss.
When VAT is calculated informally, tax collectors can conspire with business owners to submit false income statements so they pay less tax. But this would not be possible, officials claim, if business operations were documented via bank accounts.
Mr Somdy said he expected that more SMEs would open bank accounts if the government had measures in place that encouraged them to do so, adding that this would bolster revenue collection.
The President promulgated the amended VAT Law earlier this year. The law authorises the Ministry of Finance to collect VAT from all businesses in Laos. In the past, only businesses with registered capital of at least 400 million kip were required to pay VAT.
Under the law, consumers are required to pay 10 percent of the cost of the goods or services they purchase in the form of VAT. All businesses have to include VAT in the sale price of their products and pass on this money to the government.
National Assembly members expressed support for the government initiative on VAT but said that a 10 percent increase in the number of SMEs holding bank accounts was minimal.
“A 10 percent increase is very small. I think the government should force as many businesses as possible to have bank accounts,” an NA member said.
She said that if businesses had bank accounts, officials would be able to make a more accurate assessment of their assets and therefore the tax they owed, which would further contribute to the government’s coffers.
NA members said the government should modernise the finance sector so that officials were better equipped to collect taxes and the government would then have sufficient revenue to cover expenditure.
At present, the government has an uphill battle to achieve the revenue target set for 2018 and Assembly members said the government should do all it could to meet the target.