The price of whisky, beer and cigarettes in Laos may increase over the next year as the government is planning to raise the consumption tax on both imported and locally made brands.

Prime Minister Bouasone Bouphavanh has signed a prime ministerial decree on the implementation of the 2010/2011 socio-economic development plan, assigning the Ministry of Finance's Taxation Department to study and propose an increased absolute tax rate for whisky, beer and cigarettes for the government to consider and approve next fiscal year.

The move is one of the government's measures to secure its national income after deciding to adopt a single business profit tax for local and foreign firms, in accordance with the newly amended Law on Investment Promotion.

At present, foreign companies pay only 20 percent of their profit as tax to the Lao government, while domestic firms pay about 35 percent. In future, they will pay the same rate, but the figure has not yet been decided upon.

The government expects to collect revenue of about 13,021 billion kip (about US$1.6 billion) next fiscal year. It plans to spend about 15,160 billion kip (US$1.8 billion). The budget deficit is expected to reach 3.49 percent of GDP.

Tax officials said it is still unclear whether the government will be able to impose a new consumption tax rate on imported and locally made products in the next fiscal year, since it is difficult to reach an agreement on the appropriate rate.

Cigarette, whisky and beer makers in Laos want to keep consumption taxes low so their prices stay affordable and they can boost sales, the officials said.

But the government wants to increase taxes on cigarettes and beer due to concerns that excessive consumption is having a strong negative impact on public health.

The government has passed a law banning people from smoking in public areas after learning about the harmful effects of passive smoking on non-smokers.

The officials also said that although the government regularly adjusts consumption taxes on luxury goods, such as whisky and beer, they are still low compared to other countries, so these goods remain affordable.

They said it would not be a problem if the price of imported and locally-made whiskies increased, since they are not necessary for people's wellbeing, and anyway it would be good if people cut down their drinking and smoking.

Ministry of Finance Office Head Mr Sila Viengkeo said the government's policy is also to increase the absolute tax rate on imported and locally-made luxury goods such as perfume.

He explained that increased consumption tax on such products reflects the fact that the government does not want to promote their import and use.

He added that the government increases absolute tax on local and imported luxury goods regularly as it believes consumption of these goods does not boost the growth of the Lao economy.