Lao EconomyTaxUncategorized

Major Tax Revamp Trials Next Month

The government is planning to start using an electronic system for tax collection early next year with a test of the system on motor vehicles to begin next month.

Minister of Finance Mr Phouphet Khamphounvong revealed the plan in an interview with media yesterday on the sidelines of an annual government meeting with provincial governors which continues today.

“ One of the measures we are proposing to resolve tax collection issues is the use of a modern electronic system, and tests of the system will begin next month,” Mr Phouphet said.

Revenue collection has not reached the planned target because of various violations of the regulations and loopholes in procedures, which has resulted in a further deficit and hike of the government debt.

Mr Phouphet said the new method of taxation will calculate tax based on a vehicle’s engine capacity (both the size and number of cylinders), its brand and model, but not its sale or purchase price.

Despite the large number of vehicles imported into the country each year, the government only raises a small amount of tax from the trade. Importers and dealers either report their buying prices as being lower than the actual price paid or use various means to avoid the payment of any duty.

Mr Phouphet said importers reported low prices to tax officials thereby paying less tax although they sold their vehicles at much higher prices. It is possible that, by using different criteria to assess the tax to be paid and ensuring all vehicle imports have duty levied on them, the new taxation system may help end users to buy vehicles more cheaply.

He said the ministry had first announced the plan several years ago but had not been able to put it into practice until now.

He explained that setting up the system was not easy as a lot of preparation was needed to select the best technology, while the organisation and training of operating personnel also took time.

The new method will ensure that tax has been paid on all vehicles. The system will be able to report whether tax has or has not been paid, so Mr Phouphet was confident the government would earn more revenue from this source.

He said a full trial would begin next year and will gradually be applied to other sectors of business

Source: Vientiane Times