Tax and investment laws inconsistent
Business operators are encountering difficulties as the government cannot enforce the Law on Investment Promotion, according to a senior official from the Lao National Chamber of Commerce and Industry.
Chamber Secretary General Mr Khanthavong Dalavong said this week that many manufacturers in Laos continue to pay tax on imported raw materials despite the fact that the Law on Investment Promotion offers businesses tax exemptions as an incentive to establish manufacturing operations in Laos.
“Tax officials impose the 10 percent Value Added Tax (VAT) charge for importers of raw materials despite the fact that the Investment Promotion Law offers manufacturers a tax exemption,” he said while attending the second meeting on private investment promotion and management in Vientiane.
Mr Khanthavong said the government should amend the Law on Tax so that it can enforce the Investment Promotion Law more effectively, which is designed to boost private investment, job creation and sustainable economic growth.
“What we want is for the government to amend the laws so that they complement each other,” he said, adding that if the government can enforce these laws, it will make business people feel more confident about investing in Laos.
Under the VAT law, both individuals and enterprises have to pay 10 percent VAT to import goods into the country, while businesses that use imported raw materials to manufacture goods can get a tax refund after exporting their finished products.
The government imposed the VAT law last year to maintain stable revenue after import and export tariffs are abolished in 2015 in line with Asean AFTA policy to create a single production base and market in the region.
Business operators assert that the government should not impose the VAT charge when enterprises import goods, as it is a barrier to the free flow of trade in and out of the country.
“It does not make sense when the government abolishes import and export tariff charges but imposes VAT instead for businesses that import goods,” said one Vientiane businessman.
He said the government should impose VAT when the goods are sold to customers as is done in many other countries.
However, tax officials say that they cannot impose VAT at the point of sale as they will face severe difficulties monitoring the quantity of goods that businesses sell due to a lack of resources and the volume of cash sales in Laos.
They insisted that the only way they can effectively collect revenue is for them to impose VAT when materials enter the country.
Tax officials said that if businesses can provide clear data on the import of goods and the export of reprocessed goods, they will find it easier to get tax refunds from the government, adding that the government has allocated a budget for providing tax refunds