Gas graft: smugglers defraud Laos of taxes on 700 million liters a year

Citizens in Laos are calling for accountability after learning that gasoline smugglers and enablers in the government are defrauding the country out of taxes on 700 million liters (about 185 million US liquid gallons) of gasoline per year, sources told RFA.

Prime Minister Phankham Viphavanh revealed the extent of gas smuggling in an address to the National Assembly last week.

Laos is mired in perhaps its worst gasoline shortage in its history, exacerbated by rising prices, a lack of foreign currency and a rapid depreciation of Laos’ currency, the kip.

“According to our internal report, around 1.2 billion liters of gasoline is imported to our country [each year]. However, when we check with the exporters of both Thailand and Vietnam, they are sending us around 1.9 billion liters of gasoline,” Phankham Viphavanh said.

“Where are those 700 million liters?” he asked, accusing state officials and companies of corruption.

Members of the government who allow smugglers to get out of paying taxes should be punished, said Laotian sources, all of whom requested anonymity for safety reasons.

“This is an act of corruption. Those who want money will do whatever they can to get it and this will lead to a leak in government revenue,” a citizen of the capital Vientiane told RFA Lao.

“If the government can prevent this kind of problem, it will be better for the country. If they can find out the government officials and whoever else is involved, they should all be fined and fired,” the source said.

Another source told RFA that the country’s lax law enforcement allows corruption to flourish.

“There is no strong punishment for corrupt government officials in Laos. They just transfer them to other offices somewhere else. I am not sure if there will ever be a strong punishment for them,” the second source said.

“They are too flexible over this matter in Laos. If the government is serious about curbing corruption, they can do it and it will be good for our country. We have laws, but at this moment the laws can do nothing.”

A Lao analyst told RFA that Laos needs to set up an investigative committee to go after corrupt officials and expose them to the public.

“There is no accountable investigation and punishment from the relevant authorities,” the analyst said. “It is common to hear leaked information that the government found some people involved with revenue collection, but there is no punishment.

“This is why nobody is afraid of the law and the corrupt officials will just get more money.”

A proposal to immediately punish corrupt officials instead of reeducating them is under consideration at the National Assembly after it was introduced last week by Assemblywoman Valy Vetsaphong, who is also the deputy president of the Lao National Chamber of Industry and Commerce.

A Lao official who declined to be named said that the gasoline smuggling issue is under investigation.

“They are finding ways to solve this problem. The gasoline shortage still continues and it is a big headache for the government,” the official said. “We have already negotiated with our Thai trade partners to bring in more gasoline, but it will take time to return to normal.”

According to a May 2022 report from Ministry of Industry and Commerce, Laos imports around 100 million to 120 million liters of fuel a month on average. Thus, it costs around $600 million to $700 million to import enough fuel for one year.

However, prices are actually double in Laos due to the increasing price of oil on the world market.

Closed for price gouging

Gas stations in Laos that allegedly attempted to capitalize on the gasoline shortage by increasing prices have been closed for cheating their customers, sources told RFA.

“The authorities inspected all the gas stations in this province and found that three of them had been overcharging,” an official of the Industry and Trade Department of the northern province of Luang Namtha told RFA.

“They were selling gas at about 2,000-3,000 kip [$0.13-0.20] higher than the government price per liter. Our province has rules that control gas prices so we suspended those three gas stations,” he said.

There are however many gas stations that can only get fuel by buying it from abroad, and to do that, they need dollars or Thai baht. Due to a shortage of foreign currency, businesses cannot get as much as they need at the official rate from banks, so they must pay more for foreign currency from other sources. This, in turn, forces them to raise gas prices.

“We understand that the pumps get foreign currency from other sources and at higher rates but we have rules to abide by too,” the official said. “The owners of the three pumps will be fined 5 million kip [$333].”

A gas station owner in the town of Luang Namtha linked higher gas prices with higher exchange rates.

“We can’t get foreign currency from the banks, so we get foreign currencies … from private money exchange outlets at much higher rates. We can’t sell gas at the prices set by the government, we’ll lose a lot of money,” he said.

The gas shortage has forced small gas stations to close in Vientiane, leaving only the big companies in business, a motorist in the city told RFA.

“Only the large ones like Petroleum of Thailand and the Lao state fuel enterprise are able to be open,” the motorist said.

Authorities of the Industry and Trade Department of Champassak Province in southern Laos also inspected all gas stations in the province between June 21 and 28 and found seven gas stations were selling gasoline at higher prices.

According to the newspaper of Champassak Province, the authorities put locks on each gas pump, booked and fined the owners and sent them for reeducation.

According to the GlobalPetrolPrices.com website, the average price of gas in Laos was 28,070 kip per liter, or $7.13 per gallon as of June 27.

Translated by Phouvong. Written in English by Eugene Whong.