Taxes on share trading still up in the air
The government is considering waiving taxes on share trading to boost investment in the Lao Securities Exchange (LSX), according to a broker.
“According to what officials have said, the government will not tax stock trades. However, I have not received any official information on the matter,” said the broker, who wished to remain anonymous.
Many investors are calling on the authorities to disclose official information on taxes and transaction fees relating to share trading to assist their investment decisions ahead of the LSX commencing trading on January 11.
In many countries, investors do not pay tax when buying and selling shares, but rather pay a built-in transaction fee.
Under the Taxation Law, an individual has to pay income tax while companies have to pay turnover tax or Value Added Tax of 10 percent or business profit tax of about 25 percent. There is no specific article on taxes relating to share trading.
Deputy Director General of the Ministry of Finance's Taxation Department Mr Khampai Vongsakhamphoui said the National Assembly was considering taxes on share trading but is yet to provide details of the proposed tax policy.
“I don't want to comment on this issue because the National Assembly is yet to approve anything,” he said, adding that he is happy to provide the information to the public once the assembly makes a recommendation.
The assembly must approve a proposal submitted by the Ministry of Finance before January 11 otherwise the LSX will experience difficulties when trading begins.
Officials have said the government expects the Lao stock market will not only generate income but also help to ensure the transparent operation of major state and private companies, which would aid the government in collecting taxes.
According to stock market regulations, companies listed on the LSX must provide all information that affects the performance of the company for disclosure to the public.
The LSX is also expected to provide new channels for companies in Laos to mobilise capital so they can expand, creating more job opportunities for Lao people. At present, most companies obtain capital through banks, which have limited capacity to provide long-term financing.
The broker said that although the government would probably not impose taxes on share trades, it is expected that investors will be required to pay transaction fees when buying and selling stocks.
He said he has heard the fees would be 1.7 percent of the value of the transaction when making a purchase and 2 percent when selling shares.
Investors fear that high taxes on share transactions would discourage small scale investors and limit opportunities for individuals interested in investing in the nation's first-ever stock market.