Govt seeks to tighten tax collection from SMEs
Govt seeks to tighten tax collection from SMEs
Small and medium enterprises in Laos will be asked to make a summary of their income and expenditure as a reference for paying their tax, according to a senior official from the Ministry of Finance.
The ministry's Tax Department Deputy Director General, Mr Lamngneun Talamany said last week that the new measure aims to enable tax officials to collect the appropriate amounts of tax and should also end complaints by taxpayers about the estimations made by tax officials.
“Business owners are complaining that tax officials make wrong presumptions about their income and expenditure, therefore they are not happy to pay the taxes,” he told Vientiane Times .
“The new measure will give the opportunity for business owners to estimate how much taxes they think they are liable to pay.”
Unlike bigger firms, most SMEs in Laos do not hold bank accounts and therefore tax officials have to use a presumptive tax system to collect tax from them.
Mr Lamngneun admitted that in the past tax officials did not request a summary of income and expenditures from business owners, creating big loopholes for tax officials to charge more or less tax from enterprises according to what suited them at the time.
Members of the public have complained that tax officials were setting arbitrary payments to meet assigned figures set by higher authorities, after dividing the target figure by the number of businesses in a particular district.
In the past, many business owners also liked to request the tax authorities to make unreasonably low estimations over their income and expenditure so that the businesses would pay less tax, thereby negatively impacting revenues to the state.
“It is not good for tax officials to make presumptions over the amount of tax to be paid, asking businesses to pay without any supporting evidence for either side,” Mr Lamngneun said.
He was confident that the new measures will enable the tax authorities to collect more tax as the tax officials will be able to collect more accurate amounts in accordance with data on the income and expenditure of a particular business.
Mr Lamngneun said that the Ministry of Finance plans to issue tax receipts which contain lucky draws, hoping that the introduction of the new measures will encourage people to request receipts from businesspeople after purchasing goods.
“Most of the Lao people do not request receipts as they consider they will gain nothing,” he said, explaining that it will be impossible for tax officials to calculate the amount of tax which business owners have to pay without supporting receipts.
Vientiane Tax Department has signed an agreement with local companies to print the lucky draw receipts since the end of last year.
The Ministry of Finance said that it will begin to circulate the new receipts in Vientiane next fiscal year as part of a pilot project. If the project is successful, the finance ministry will expand the project to other provinces.
According to a report from the Ministry of Finance, business taxes are one of the major sources of government revenue. In the 2014-2015 fiscal year, the government expects to collect 9,879 billion kip (US$1.2 billion) in business taxes.
However the government is now struggling to collect revenue due to a lack of good mechanisms which ensure accountability by collection officials.
At present, the government is able to collect revenue equivalent to only 20 percent of GDP. Meanwhile economists say that the government must collect revenue of 27 percent of GDP so as it can meet its planned expenditure.
vientiane times
