The private sector has called on the government to review Cambodia’s taxation law, a statute that business leaders say is outdated and needs to change if Cambodia wants to continue to attract foreign investment.
Led by Cambodia Chamber of Commerce (CCC) president Kith Meng, a delegation of more than 100 business people met with Kong Vibol, secretary of state for the Ministry of Economy and Finance, at the CCC headquarters in Phnom Penh yesterday. They encouraged a review of the Law on Taxation passed in the late 1990s, which Meng said did not match the current needs of the Cambodian economy.
“Let me tell His Excellency, this law was created 15 years ago as I know, and this law was made referring to the situation of the time,” Meng said, adding that tax laws had not kept pace with the economic conditions of today.
Meng said that with the onset of the ASEAN Economic Community (AEC) in 2015, when trade barriers across the region are relaxed and competition for foreign investment intensifies, Cambodia needs more than ever to remain attractive for investors.
Although details were not discussed at these initial talks, the draft agenda called for a lowering of the value-added tax (VAT) from 10 per cent to seven per cent, in line with other ASEAN members. Thailand’s VAT, for example, is 7 per cent.
The National Assembly adopted the Law on Taxation in January 1997.
Meng used Hong Kong as one system to possibly emulate. There, he said, tax rates are low, but the government is able to collect dues effectively.
“Taking small tax, [they] collect more; taking big taxes, [they] escape a lot,” he said, suggesting that businesses would be less likely to look for avenues to avoid paying taxes if they were considered more reasonable.
Vibol said he was willing to consider the forum’s recommendations.
“I won’t kick out this proposal. I will take it to a higher level now that the business community has proposed this, and consider whether the ministry will lower,” Vibol told the meeting.
“I see the private sector playing a very crucial role in the economic development. I highly value the private sector as the state partner,” he said.
Tax revenue grew about 20 per cent in the first half of this year compared with the same period in 2012, but economists and opposition leaders have cast doubt on the figures.
Critics also say that revenues could be higher if tax collection was more aggressive.