May 20, 2015

Business Tax Collection Clamp Down in Laos

Pay tax or close down, Laos' businesses told
By:  Xinhua News, May 13 2015

VIENTIANE, May 13 (Xinhua) -- Authorities in Laos have officially "suspended the operations" of 91 companies operating in the country for a reported failure to pay taxes due, local media reported Wednesday.

The companies have been given until June 4 to negotiate with taxation authorities or face revocation of respective operating licenses according to Vientiane's Industry and Commerce Department and reported in state-run media Vientiane Times.

Speaking to Xinhua, Lao National Chamber of Commerce and Industry (LNCCI) vice-president Mr Oudet Souvannavong said while factors varied on a case-by-case basis, significant issues remained relating to implementation of the country's value-added tax (VAT) including its application to imported materials, something highlighted by participants during the Lao Business Forum (LBF) public-private dialog.

He said some tax officials continued to utilize previous methods of turnover estimation instead of the officially- sanctioned VAT system, leading to potential discrepancies emerging between individual business' and official estimations of tax liabilities payable.

The suspension announcement follows similar license revocations earlier in the year and comes as the nation's administration seeks to sure up taxation revenues and address so-called revenue leakages.

Despite rapid annual economic growth stretching more than a decade, Laos continues to face significant structural budget deficits compounded by the impact of lower prices for major exported mineral commodities including copper and gold, putting pressure on policymakers to sure up alternative sources of revenue.

While a boost to government coffers is expected as an increasing number of export-focused hydroelectric power generation projects in varying stages of planning, construction and commissioning come on line over the next half decade, greater diversification of the economy and revenue sources is seen as necessary, noted in both government pronouncements and recommendations from international financial organizations alike.

Reforms to encourage greater business investment and value- adding agriculture, manufacturing and services in Laos have been recommended by the World Bank and Asian Development Bank as the country prepares for greater competition as a result of regional integration via the ASEAN Economic Community by the end of 2015.

High establishment and labor costs relative to productivity, a lack of skilled workers and a "significant gap between the de jure legal framework and de facto environment that enterprises experience on the ground" were among the challenges identified in the World Bank's Investment Climate Report published December 2014.

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