The government has closed a tax concession loophole that was being exploited by investors to allow them to import luxury cars into the country without paying normal rates of tax.

Ministry of Finance Customs Department Deputy Director General Bounchom Oubonphaseuth, yesterday confirmed the government had removed sedans, jeeps and other vehicles used for company administration from the list of imported materials which were only subject to a one percent tax charge under the investment promotion law.

“Company managers who want to buy cars to drive to work, must pay full tax to the government,” he told Vientiane Times. “Cars for company managers to drive have nothing to do with investment promotion.”

He said company managers paid full taxes to governments when buying their own cars in the neighbouring countries of Vietnam and Thailand .

According to the Lao Investment Promotion Law, companies which import materials to establish businesses in the country are only required to pay an import tax of one percent of the total value of the imported materials.

He said the government used to allow investors to import cars with a tax rate of only one percent because it believed this policy provided an incentive for businesspeople to invest money to establish companies, creating jobs and income for people in the country.

But after a careful study, the government discovered business owners had been using gaps in the policy to avoid paying proper taxes to the government, while others were using it to import vehicles and resell them, resulting in lost government revenue, he said.

Mr Bounchom said the new government policy would have no negative impact on investment promotion in the country amongst legitimate businesspeople or those using vehicles such as trucks and busses as one of the main components of their work.

He confirmed enterprises that used trucks and busses would still have access to the special tax charge offered in accordance with the Lao investment promotion law, but they would no longer get special treatment when importing cars for company managers to drive to work.

He said the Ministry of Planning and Investment and the Ministry of Finance were developing regulations to ensure the new government policy was put into practice.

“There will be more detail on how to identify which types of products will be eligible for the special tax reduction,” he said.

Mr Bounchom said the government had not changed the tax rate for imported vehicles.

He also said the government had advised the Ministry of Finance to prevent people using the government's policy on fundraising promotion as a loophole for purchasing cars. The government does not charge any taxes for international organisations to import cars and vehicles used in the operations of their development projects.

“In some cases, the development project has no funds to buy cars, so individuals add their own money to the project to buy a car which is exempt from taxation,” he said.

Mr Bounchom said the ministry would study proposals from international organisations carefully before allowing them to import vehicles in this manner.

By Vientiane Times