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Criticism for Cambodia’s tax revenue

Criticism for Cambodia’s tax revenue

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Son Chhay, a Sam Rainsy Party parliamentarian, speaks to reporters last year. Photograph: Pha Lina/Phnom Penh Post

Cambodia's tax revenue increased 16 per cent in the first half of this year compared to the corresponding period last year – a rise economists have attributed to improvements in the Kingdom’s economy.

Critics, however, say it amounts to little compared to the national gross domestic product (GDP).

Data from the Customs and Excise General Department shows total tax revenue collected was US$454 million during the first half of 2012, compared with $391 million in the corresponding period last year.

Son Chhay, a Sam Rainsy Party parliamentarian, has criticised the tax-collection system, pointing to the high level of tax leakage and losses.

“We all know that our GDP rose to nearly $15 billion. If we compare that to our present tax collection, it is not equal to 11 per cent of the GDP,’’ he said. “The leakage is still huge – that’s why some high-ranking tax officials have become millionaires."

“They can simply use tax collection as a way to pad their own pockets. Although it rose year-on-year, it does not reflect the real payment or collection.”

Chan Sophal, president of the Cambodia Economic Association, said the rise in revenue had come from tax-collection reforms that had made the collection process more effective.

“I agree with raising our tax collection revenue, because it goes hand in hand with the improvement of Cambodia’s economy – especially the growth of imports,” Chan Sophal said.

He also said the increase in revenue was a result of the increased flow of investment and raw material imports into the Kingdom as Cambodian exports increased.

Hiroshi Suziki, CEO and chief economist of the Business Research Institute for Cambodia, said that so far, the government, especially the Ministry of Economy and Finance, had made big improvements in the efficiency of tax collection.

It had been able to tackle the issue because of the Public Financial Management Reform Program implemented in 2005 and supported by the World Bank.

Olaf Unterroberdoerster, a senior economist for the International Money Fund’s Asia and Pacific department, told The Phnom Penh Post in April that Cambodia had a very low level of tax revenue compared to GDP .

If it wanted to raise funds in a sustainable way for development, investment and education, “it will be necessary to raise the revenue performance of the government so that the expenditure can be financed,” he said.

Chan Sophal said that despite the increase in tax revenue, the government had to try to strengthen tax collection.

“It still has more room to raise revenue,” he said.

To contact the reporter on this story: May Kunmakara at [email protected]

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