Laos Finance Minister Contemplates Corporate Tax Rate Hike To Bolster National Revenue

One of the avenues being explored is the elevation of Value Added Taxes (VAT) on goods and services, which can serve as a pivotal source of revenue generation for the Laotian economy.

In a move aimed at strengthening the nation’s fiscal resources, the Finance Minister of Laos is deliberating on the possibility of increasing tax rates on corporations. This potential tax adjustment, although often met with public resistance, is regarded as a vital measure to ensure the sustainable financial well-being of the country.

One of the avenues being explored is the elevation of Value Added Taxes (VAT) on goods and services, which can serve as a pivotal source of revenue generation for the Laotian economy.

Taxation reform is being considered due to the current VAT tax rate of 7%, which was originally reduced from 10%. The state is now contemplating a return to the original 10% rate for various reasons. The 7% tax rate is deemed insufficient for stimulating the economy effectively. This lower rate has contributed to budget deficits, which, in turn, could perpetuate a cycle of poverty. While the state recognizes the potential for income generation through higher tax rates, it is also aware of the adverse effects of a sudden increase. Therefore, it has chosen to revert to the original tax rate of 10%.

Furthermore, in addition to increasing the VAT rate, the Ministry of Finance is exploring several measures to enhance the tax system. One such measure involves replacing tax exemptions with tax refunds. This change is expected to both reduce revenue loss for the state and provide support to local small businesses.

A new economic stimulus package is in the drafting phase, and the revised VAT tax rate will come into effect starting in 2024. The government also aims to comprehensively reform the tax system, prioritizing the most critical aspects over the less important ones.

A recent example from Uzbekistan serves as a noteworthy model for other countries looking to increase their VAT rates. In this instance, 52 foreign companies, primarily IT firms like Meta, Apple, and Google, have contributed a substantial VAT payment of 48 billion Soums (equivalent to US$3,934,147.20) to Uzbekistan for the period spanning from January to September. This tax influx is expected to have a significant impact on the country’s GDP calculation.

Source Kun.UZ