The 7% value-added tax (VAT) rate has been extended for another year, taking effect retroactively from Oct 1.
The extension, invoked under Section 44 of the interim constitution by the prime minister, was announced in the Royal Gazette on Tuesday.
According to the announcement, the country was still facing an economic slowdown and a 10% VAT rate could affect spending in the private sector and the overall economy. Extending the use of the 7% VAT would avoid increasing the financial burden on the public and create confidence for the private sector in conducting businesses.
Section 80 of the Tax Code stipulates the VAT rate at 10% of the value of goods and services but governments have through royal decrees reduced it to 7% since 1997 for political and economic reasons.
Without a decree to extend the reduction period, which ended on Sept 30, the 10% rate would apply.
The announcement said the Section 44 special power was used because the government could not proceed with a royal decree issued under the Revenue Code governing the reduction of VAT.