Laos to offer value added tax exemption for imported raw materials
Laos to offer value added tax exemption for imported raw materials
Lao manufacturers will be able to reduce production costs once the government completes the amendment of the value added tax law.
Deputy Minister of Finance, Mr Santiphab Phomvihane proposed that the National Assembly consider and approve the revised law on value added tax. The aim is to offer value added tax exceptions for business people who import raw materials and machinery to produce goods for domestic consumption and export.
“The amendment of the law is in line with the investment promotion law and WTO requirements,” he told the NA members.
The government promulgated the value added tax law in 2010. The current law offers a wide range of value added tax exemptions including agricultur al produce and education services but not imports of raw materials or machinery.
The current value added tax rate is 10 percent of the value of the goods. In fact, the current value added tax law allows business people to receive refunds from the government if they import raw materials to produce goods for domestic consumption and export.
However, one of the main challenges is that the government faces difficulty enforcing the law due to a lack of capacity building and mechanisms to refund the business people.
A number of businesses urged the government to add raw materials and machinery to the list of tax exemptions so as they will not have to seek refunds from the government.
Mr Santiphab said that that the law amendment is designed to ensure that officials can enforce the law effectively while business people will find it easier to run manufacturing businesses.
More favourable business conditions are necessary with the coming inception of the Asean Economic Community in 2015.
National Assembly President, Ms Pany Yathortu said that the assembly welcomed the government's decision to amend the law as one of the measures to prepare for the Asean Economic Community, adding that the move will make Lao manufacturing businesses more competitive.
“We have established a number of special economic zones as part of efforts to attract domestic and foreign investment but once the investors view our tax rate, they consider it very unattractive,” she said, adding that the tax exception will make more investors want to invest in Laos.
After debating the amended law, the National Assembly members expect to approve it later this week.
The Lao government opened the country for foreign investment in 1986 after the introduction of the market oriented economy. The country also adopted a policy to promote private investment as it considers it a driv ing force of Lao economic growth.
One of the four breakthrough approaches which the government has made a strong commitment to address was eliminating business and investment barriers so as the country can maintain economic growth of at least eight percent from 2011 to 2015.
vientiane times
