Value-Added Tax Comes Into Play on Jan 1

The Finance Ministry on Thurs­day announced that the long-awaited value-added tax, or VAT, will be implemented on Jan 1.

Starting at the beginning of 1999, the 10 percent tax on goods and services will apply to 2,000 of the country’s largest businesses, tax department Director Hong Tha said.

With just six weeks until the VAT begins, the tax department is hurriedly trying to prepare, he said. “I hope we have time to do it.”

A formal announcement and a workshop on implementing the VAT will be held next week, Hong Tha said.

The VAT was part of the Law on Taxation passed in 1997 with plans to launch it last January, but Hong Tha said that the new tax was postponed for one year be­cause the economic situation is not good.

The VAT will replace the existing 4 percent turnover tax. Unlike the turnover tax, which taxed companies’ revenues, the VAT will be passed along to the consumer, who should see prices rise by 10 percent.

Some services will be exempt from the tax, including postal services, hospital and medical services, insurance activities and approved non-profit activities.

He could not estimate on how much money this might raise for the cash-strapped government.


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