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Laos: Ministry of Finance moves to modernise tax administration

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Daniel Harrison

In an effort to modernise the country's tax administration, the Ministry of Finance (MoF) is planning to implement an electronic tax collection system early next year; a test of the system was set to begin in October (2013), commencing with motor vehicles. Considered a priority project of the MoF, the Lao Electronic Tax System (LETS) is in part a response to Laos' recent ascension to the World Trade Organisation and in anticipation of the ASEAN Economic Community's (AEC) commencement in 2015.

It is expected that modernisation via an electronic system will drastically improve the country's revenue collection efficiency by reducing violations of the tax regulations and closing loopholes in procedures.

Current tax collection issues

Despite the large number of vehicle importations, it is said that the government raises only a small amount of tax; importers and dealers commonly under-report their buying prices or use other means to avoid the payment of duties.

Key objectives

The MoF outlined two important objectives of the project: the first being to build a more robust tax administration which ensures more consistent and certain revenue collection; the second being to modernise tax administration in order to streamline its management and reduce the compliance burden for business operators in Laos, while also providing a more transparent tax system.

Implementation

The project's implementation is planned to take place in three phases:

  • Phase 1 – Motor vehicle taxes (by December 2013)

  • Phase 2 – Individual and juristic entity income taxes (by December 2014)

  • Phase 3 – Consumption taxes (by December 2015)

Vehicle Electronic Tax System

As part of phase one, the Tax Department will implement the Vehicle Electronic Tax System (VETS).

Key objectives in implementing VETS include:

  • Replacing the current vehicle import duty and tax system

  • Improving expected tax revenue reliability and certainty

  • Centralising information management

  • Managing the revenue collection throughout the country

  • Reducing the compliance burden and improving transparency

Motor vehicle excise tax

As a side note, it has been widely reported that the government plans to introduce new regulations to increase motor vehicle excise tax rates and to allow payment terms of annual installments over five years rather than the current method of upon importation. However, it remains to be seen whether this plan will go ahead.

Daniel Harrison (daniel.harrison@vdb-loi.com)

VDB Loi

Tel: +85 62 145 4679

Website: www.vdb-loi.com

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