The government of Timor-Leste (East Timor) intends to double non-oil tax revenues to US$400 million a year with the introduction of Value Added Tax (VAT) and increases in the taxes on tobacco and alcohol, said the Minister of Planning and Finance.
Minister Rui Gomes said on the second day of a parliamentary debate on the government programme that "securing more domestic tax revenue is a critical issue for the future of Timor-Leste, and is a priority of the government."
In addition to the introduction of VAT, which "can contribute about 5.0% of GDP," Gomes noted the application of progressive rates in other taxes and "discrimination in tax collection in areas that harm public health, such as consumption of alcohol and tobacco."
The minister, quoted by Portuguese news agency Lusa, said it was necessary to combat the informal economy, which accounts for 60 to 70% of household income, but does not contribute to state revenues.
At the beginning of October, the International Monetary Fund (IMF) said that increasing domestic revenues was critical and welcomed the establishment of the Customs Authority and the Tax Authority and the action plan to increase compliance with tax obligations.
"Equally critical will be the adoption of VAT legislation and the introduction of this tax by 2020, in order to stimulate more domestic revenues," said a statement issued in Washington at the end of visit by a team led by Yu Ching Wong. (macauhub)