East Timor to impose import duty

East Timor to impose import duty

DILI, East Timor (Reuters): A five percent import duty and a sales tax of up to 15 percent for motor vehicles will soon apply to goods coming into East Timor under a new tax regime announced by the International Monetary Fund on Friday.

A sales tax on imported beer and wine of US$1.50 per liter, a $1.50 per kilogram tax on cigarettes and a five cents per liter tax on gasoline and diesel will also be applied.

"The basic principle is to have tax measures that are very simple to administer because the administrative capacity of East Timor is still very limited," IMF senior economist Luis Varennes Mendonca told reporters in Dili.

"Essential import duties, sales taxes, the exemption of income tax on coffee producers, these are the three tax measures," he said.

The tax regulations were adopted by the 15-member National Consultative Council (NCC), established by the United Nations last December to ensure East Timorese were involved in the decision-making process over the next two years as the territory moves toward full independence.

"Of course there are tax exemptions that follow normal international practice," he said. "Normal exemptions under the Vienna convention, exemption for goods that are imported to be re-exported and exemptions also on...goods imported by the United Nations, other international organizations, non profit organizations and so on."

The taxes are expected to raise up to $15 million this year, he said.

Varennes Mendonca said the taxes would be retroactive for "some businesses", but he did not believe they would discourage new investors to the territory because the rates were so low.

"If you look at these numbers these tax rates are low by international standards and the reason for that of course is that we don't want to start with a heavy tax burden."

The IMF did not indicate when personal income tax would apply.