Tobacco taxes still a challenge for Laos
Tobacco taxes still a challenge for Laos
Tobacco product control and revenue collection still pose challenges for Lao tax officials because of the existing tax policy, which requires amendment in order to overcome the challenges.
This challenge was outlined at the first Consultation Meeting between the Lao Tax and Customs Department and Royal Thai Excise Department yesterday in Vientiane.
Currently, Tax Law imposes an excise tax of 60 percent of wholesale price on domestically produced cigarettes, as well as a value added tax (VAT) of 10 percent of wholesale price.
However, in practice an excise tax of between 15 and 30 percent of production costs is all that has been collected, Mr Thammaloth Latsaphon a representative of the Tax Department detailed this during a Power Point presentation.
According to the presentation, the Lao government ratified a tobacco control convention in 2006 and then adjusted the structure of tobacco pricing, collecting excise tax on tobacco at a specific rate.
An addit ional excise tax of 100 kip per pack commenced on January 1, 2010 and increased to 500 kip per pack in April 2011. Currently, the department collects a VAT of 10 percent of production costs and royalty fees.
Meanwhile, taxes on imported cigarettes are collected at a single flat rate, which contradicts the regulations of the Ministry of Finance.
Nowadays, the department collects excise tax and customs duty on the imported cigarettes through the Automated System for Customs Data system based on Lao Customs Tariffs Nomenclature.
Customs also has a joint partnership with various sectors and the trading community, aiming to combat illegal cigarette products. It seized a total of 219 cartons of illegally imported cigarettes in 2012.
The PowerPoint presentation also detailed the timeline of tobacco excise taxes charged in Laos. In 1996, the tobacco excise was only 15 percent and in 1998 it was adjusted from 15 percent to 30 percent, which came into force in January, 1999.
In 2000, a specific tax was adopted for domestic cigarettes of 800 kip per pack and 1,500 per pack for imported cigarettes but it was only implemented for one year.
The following year, the government joined with foreign investors, signing tobacco related concessions which extend over a 25 year period.
According to the contracts, the government will collect excise tax of 15 percent of production costs if the figure is less than 1,500 kip and 30 percent of production costs if it is equal or higher than 1,500 kip.
In 2005, the excise tax was changed from 30 percent to 55 percent, however in practical terms it is yet to be fully enforced due to the pre-existing contracts with investors which run for a period of 25 years.
In 2010, the specific tax of 100 kip per pack was increased to 500 kip pe r pack and at the end of 2011 the Tax Law was amended and excise tax rate n ow stands at 60 percent.
Mr Thammaloth pointed out the challenges of the revised tax law. It cannot be broadly and effectively applied due to the 25 year contracts, tobacco industry interference, line ministry support and the smuggling of tobacco.
To solve these issues, Laos needs to amend the current contract, increase additional excise taxes, build capacity among customs and tax officials, and cooperate and coordinate with the private sector to suppress illegally imported cigarettes, he said.
The object of the meeting was to exchange experience a nd lessons on tobacco tax revenue, the process of customs notification at border checkpoints, tobacco product control, measures to combat the illegal tobacco trade and punishment for offenders.
The Director General of the Tax Department, Mr Atsaphangthong Siphandone, Tax Department Deputy Director Mr Lamngeun Tanlamany, and the Royal Thai Excise Department Director General Mr Somchai Pulsawas were in attendance at the event.
vientiane times
