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Thai Government To Air Concerns On Lao VAT

Source: Bangkok Post

The government is set to raise the issue of Laos’s value-added tax (VAT) in a joint discussion with Lao counterparts, fearing the new tax measure may cripple growing border trade.

Adul Chotinisakorn, deputy director-general of the Foreign Trade Department, said that while the issue is an internal matter for Laos, it needs to be raised at the joint trade committee meeting.

Thailand will ask for leniency and a spending ceiling from Laos during the meeting, which is expected to be held soon.

Laos has begun collecting VAT on products imported from abroad, starting at the first Thai-Lao Friendship Bridge between Nong Khai province and Vientiane.

Lao citizens or expat passengers living in Laos upon entry through border checkpoints, including international airports, are required to pay 10% VAT on their (new or used) personal effects valued at more than US$50. The VAT levy is waived for passengers who travel less than twice a month.

Laos is improving facilities to ensure transparency and swift service, especially IT and software systems, as well as setting up more lanes.

Mr Adul said the new tax measure will affect the spending of Lao citizens and expats who make frequent trips to Thailand to buy goods.

“We’ve already started seeing an impact as the number of Lao visitors dropped sharply after the VAT became effective,” he said.

Monnipa Kovitsirikul, chairwoman of the Thai Chamber of Commerce for Nong Khai, said that after Lao authorities started collecting the VAT, spending on goods by Lao visitors fell by 70-80%.

“After the VAT came into force, we’ve seen fewer Lao visitors every day,” she said. “More importantly, most of them are only buying essential goods as they try to dodge paying tax.”

Mrs Monnipa said the policy will definitely lower border trade value now worth about 60 billion baht a year at the Nong Khai checkpoint.

According to Commerce Ministry figures, border trade between Thailand and Laos amounted to 177 billion baht in 2015, with Thai goods accounting for 144 billion. Key products included automobiles and parts, diesel, steel products and livestock.

For the first 10 months this year, border trade between the two neighbours rose 18% year-on-year to 165 billion baht, with exports from Thailand totalling 111 billion, up 4.8%.

Thailand’s overall cross-border trade is expected to flourish over the next few years once the government’s planned special economic zones (SEZs) start up.

The government decided two years ago to set up industrial estates in SEZs in 10 border provinces for the purposes of agriculture, industry, logistics and tourism.