Laos to reduce loans from other countries by 2010

Loans from international financial institutes currently make up about 80 percent of the country's Gross Domestic Product (GDP), a quantity that the government plans to reduce to 70 percent by 2010.

The problem is that while the government has tried to collect enough income nationally to use in the national socio-economic development process, the funds generated are persistently inadequate, which is why Laos needs to borrow from other countries.

According to the Director General of the Fiscal Policy Department of the Ministry of Finance, Mr Bounthong Keomahavong, to reduce the amount of loans from other countries, Laos has to increase its national revenue.

“The most important thing the country can to do is reduce the leak of the national revenue collection,” Mr Bounthong said at the Faculty of Economics and Business Management at the National University of Laos, during a seminar entitled ‘Perspective on Lao Economy and Business', supported by the Japan International Cooperation Agency last week.

According to research from the Swedish International Development Agency and the International Monetary Fund, in 2003-2004, between 40 and 50 percent of revenue from the tax sector was leaked, while the customs sector lost between 60 and 70 percent of the total revenue collected.

Mr Bounthong said the overall domestic revenue collection is still low when compared to the GDP, adding that the revenue collection in local areas has tended to decrease, despite increases in expenses incurred by the government for development projects in the area.

From now until 2010, the government is cooperating with international institutes to investigate the current fate of national revenue and find the best way to protect the income leakages.

To begin with, he said, officials concerned would need to focus on improving the laws and oth er regulations to ensure there are no loopholes enabling the leak.

Mr Bounthong said another planned course of action is to improve the organisation, especially the revenue collection sector, by advising individuals to adhere strictly to their duties and operate following the law, as well as relocating some officials' postings to deter corruption.
 

In addition, there should be training for tax and customs officials throughout the country, to guarantee that they have a comprehensive and technical understanding of tax collection.

He added that many sectors and people in the country must cooperate with the government to prevent revenue leakages. Entrepreneurs, for example, in doing business with the government, should keep accounts according to regulations, so that officials can check their actions.

In 2009, the country will formally use a Value-Added Tax, resulting in higher prices for many goods and services. This means that for each purchase made, the buyer should ask for the receipt, because they are required by law to pay 10 percent of the products' cost.
 

If the buyer doesn't ask for bill, they won't know whether the traders have paid that tax to the government.

By Soudalath Phonpachith
(Latest Update August 21, 2007)