Lao govt eyes vehicle tax rise

News Desk in Vientiane/Vientiane Times
Asia News Network

Vientiane (Vientiane Times/ANN) - The Lao government is considering increasing vehicle taxes as part of efforts to boost revenue collection to meet the rising demand in terms of state expenditure.

"We have proposed new tax rates on vehicles for the finance minister to consider, but I do not know when he will approve them," Tax Department Director General Sithisone Theppasy told Vientiane Times yesterday.

The price of these vehicles will rise from 25 per cent up to 150 per cent of the basic price if the Ministry of Finance approves new tax rates.

The new tax rates for vehicles will be in line with the revised Law on Tax, which was promulgated in 2011.

The new law allows the finance ministry to set excise tax rates on vehicles from 25 per cent up to 150 per cent of the value of vehicles, depending on their type and engine size.

Currently, the government collects both tariff and excise taxes from car dealers, and the excise tax rate ranges from 25 per cent to 90 per cent. The exact tax rate levied on each vehicle type and engine size is defined in the law.

Sithisone admitted that the tax rate adjustment could cause the price of vehicles in the Lao market to increase. However, he was confident that the increase of vehicle prices would not have a strong impact on sellers or buyers.

"What we have proposed is a new tax rate that will help increase state revenue while having no significant impact on the car sales market," he said.

Mr Sithisone said the finance ministry would go ahead with its policy to collect excise tax from buyers annually over a five year period instead of as a lump sum from next year, as part of efforts to make the price of vehicles more affordable.

"We can confirm that we will launch a pilot project for the new tax collection system next year," he said, adding that finance officials are currently holding discussions with the sectors concerned, including the Ministry of Public Works and Transport and the Ministry of Public Security.

According to tax officials, the new policy will help car import dealers as they will not have to pay the excise tax up front when importing vehicles. Under the new policy the excise tax will be collected from car buyers directly on an annual basis.

Car buyers, in particular small and medium enterprise owners, expect to benefit from the policy, as they will be able to save money for business expansion after the lump sum tax is abolished.

A number of car dealers in Vientiane have welcomed the new policy, but believe it will not be easy for the government to implement it. They say it will be difficult for the government to collect tax from people who on-sell their cars before all the tax is paid.

The lack of law enforcement will also make it easier for car owners to avoid paying tax to the government, the car dealers said.