The 2004 Article IV Consultation was concluded on November 29, 2004.
The fiscal year runs from October to September.
The package included the restoration of a two-rate turnover tax and a rationalization of excise taxes that will result in an increase in the effective rate on some goods (e.g., beer).
Staff have encouraged the authorities to limit the wage bill, as close as possible to the original proposal of 4.5 percent of GDP.
The pressure on the wage bill this year is coming mainly from higher employment, following a decision to give provinces greater autonomy over recruitment.
The remainder would come from the full-year effects of the new tax measures approved in May and additional mining royalties and taxes.
Spending on education and health—$10 per capita (combined)—is well below the level needed to make progress toward the Millennium Development Goals.
Jointly with the World Bank, staff will update the Debt Sustainability Analysis for Lao P.D.R. at the time of the 2005 Article IV Consultation.
This might initially be best achieved by ensuring closer coordination between the Tax Department and the Vientiane Municipality Office, as most of the large taxpayers are administered by these two offices.
The current agreements, which were adopted in 2003, were designed to strengthen the banks’ operating framework. The banks’ management, the Ministry of Finance, and the Bank of Lao P.D.R. are signatories to the agreements.
Staff understand that the authorities plan to combine the 2003 and 2004 audits this year, to shorten the delay in finalizing the BOL’s audited accounts.
The recent PRGF arrangement expired on April 24, 2005.