Lao PDR Launches Domestic Resource Mobilization Modernization Project

Strategic Insights -

The Lao People's Democratic Republic (Lao PDR) has officially launched the Domestic Resource Mobilization Modernization (DRMM) Project, in partnership with the Asian Development Bank (ADB), with the aim of improving the efficiency, transparency, and effectiveness of domestic revenue collection. The project is backed by a USD 25 million loan and a USD 2 million grant from ADB, and is expected to strengthen fiscal sustainability and support inclusive economic growth. Despite steady economic growth averaging 6.2% annually since 2010, the Lao PDR's tax-to-GDP ratio remains low at 11.1% in 2022, making it one of the lowest in the Asia-Pacific region.

Key Takeaways:

  • The DRMM Project is a USD 27 million initiative to modernize tax administration and improve domestic revenue collection in the Lao PDR.
  • The project aims to enhance fiscal sustainability and support inclusive economic growth, with a focus on digital transformation, e-invoicing, and data analytics capabilities.
  • The project is part of the 2024-2028 cooperation framework between Laos and ADB, as well as the 9th Socio-Economic Development Plan and the Tax Strategy Development Plan.
  • The government aims to increase tax revenue to at least 14% of GDP by the end of the project, with 75% of businesses registered with tax identification numbers.
  • The project will be implemented by the Ministry of Finance through a Project Steering Committee and a Project Management Unit, with ADB's support.
  • The project reflects international best practices in domestic resource mobilization reforms, tailored to the Lao context.

Statistics:

  • The Lao PDR's tax-to-GDP ratio is 11.1% in 2022, one of the lowest in the Asia-Pacific region.
  • The Lao economy has averaged 6.2% annual growth since 2010, but has heavily relied on external borrowing.
  • The project is backed by a USD 25 million loan and a USD 2 million grant from ADB.
  • The project aims to increase tax revenue to at least 14% of GDP by the end of the project.
  • 75% of businesses are expected to be registered with tax identification numbers by the end of the project.

Sources:

  • Lao News Agency, "Ministry of Finance Launches Domestic Resource Mobilization Project"
  • Asian Development Bank, "Laos: Domestic Resource Mobilization Modernization Project"
  • Ministry of Finance, Lao PDR, "9th Socio-Economic Development Plan (2021-2025)"
  • Ministry of Finance, Lao PDR, "Tax Strategy Development Plan (2021-2025)"