According to the draft, the government will remove the provision detailing the amount that businesses have to earn before being subject to the law, which imposes a 10 percent charge on the price of goods and services.
At present, only companies earning more than 400 million kip a year are subject to the law. Firms with lower revenues are not subject to the law but are required to pay the presumed tax as a lump sum.
Addressing the National Assembly, Mr Somdy said the proposed change in the law will increase the number of enterprises that are subject to the Value Added Tax Law.
Currently, only 20 percent of companies registered in Laos are subject to the law. This poses a challenge for the government in expanding its revenue collection base and collecting sufficient revenue to meet its expenditure needs, he said.
In addition, the proposed amendment will provide a major boost to the production of goods for export. Companies making goods for export will no longer need to pay 10 percent as VAT, Mr Somdy said.
The proposed changes will enable the government to provide tax incentives for companies that produce strategic goods and services which the government wants to promote.
These companies, which operate under government prioritised activities, will not need to pay any VAT, Mr Somdy said.
One of the biggest benefits of the proposed amendments is that tax officials will have clearer policy guidelines and references when collecting VAT from companies operating in Laos.
With clearer guidelines, production will be promoted, and the operation of businesses will be easier. In addition, local and foreign investment will be facilitated while the distribution of goods and services will be faster, according to policy-makers at the Ministry of Finance.
Mr Somdy said that before submitting the amendments to the Assembly, the Ministry of Finance consulted with various stakeholders as part of efforts to improve the content of the law.
The proposed amendments were backed by technical support and advice from local and international specialists, he said.