Lao business profit tax ranks midway among Asean nations

Lao business profit tax ranks midway among Asean nations

Laos' business profit tax rate falls in the middle of the rankings of Asean nations after the government lowered the rate in 2011.

According to international auditor KPMG, the business profit tax rate in Laos stands at 24 percent, higher than the corporate tax rates in Singapore, Cambodia and Thailand which are 17, 20 and 23 percent respectively.

The Lao government revised the Law on Tax in 2011, establishing a single business profit tax of 24 percent. Under the previous law, the government levied a 20 percent tax on foreign investors while Lao businesses were charged 35 percent.

The government imposed a lower business profit tax on overseas businesses because it wanted to attract foreign investment to help boost economic growth.

But domestic firms, especially those in the same line of business as foreign investors, complained that the different tax rates were unfair and urged the government to tax all businesses equally.

KPMG notes that Laos' business profit tax is lower than in Vietnam, Indonesia and Malaysia, which impose a 25 percent profit tax.

Officials at the Lao National Chamber of Commerce and Industry say Laos' business profit tax rate is high compared to that levied in other Asean countries. This is a challenge for the government in attracting both domestic and foreign investment.

They say the government should consider lowering the business profit tax to attract more domestic and foreign investment amid rising competition among Asean nations to boost foreign direct investment.

The officials note that while Laos has plenty of natural resources and agricultural land, the country is landlocked, which means the cost of transport to overseas markets is very high.

Laos has two main access routes to transport manufactured goods to overseas markets, through Thailand and Vietnam. Laos also has poor infras tructure, so bearing these disadvantages in mind it would be advisable to charge businesses a lower profit tax in hopes of boosting foreign investment.

Laos also lacks a skilled workforce. The government has acknowledged this problem and is investing more to develop the education system, aiming to provide more workers to meet the needs of foreign investment and economic growth.

One of the big challenges for Laos in attracting foreign investment is that the cost of labour here is higher than in Vietnam, Cambodia, Myanmar and Indonesia, according to information posted on the official website of the Ministry of Planning and Investment.

vientiane times