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Customs' taxing dilemma

Average Cambodians are to pay the price for stamping out corruption in the customs department.

Prices for basic goods, such as food and clothing, rose recently after the department was ordered last week to clean up its act and apply the official tax rate, importers told the Post yesterday.

A November 13 directive to the General Department of Customs and Excise of Cambodia was signed by its general director, Pen Simon.

Simon said the department was going to “clean up the weaknesses” and work within the letter of the law.

“All customs and excise officers need to respond to their duty as customs agents to tax all businesses based on rule and regulation,” the statement reads.

Since then, more stringent procedures have been applied, causing a slowdown at borders.

Previously, customs officers would often undercut the legal tax rate and pocket a portion for themselves. They are now enforcing the official rate, causing a hike in prices for consumers, according to importers who spoke to the Post yesterday.

Hy Ramy, the managing director of a food importer who did not want his company’s name revealed, said food prices passed on to consumers were increasing by 15 to 20 per cent.

“The price of goods is increasing, but it is not because of a higher rate of customs tax, it is due to following the law,” he said, adding that the majority of his imports come from Thailand.

Ramy acknowledged that in order to stay competitive he had previously negotiated lower-than-official rates, but welcomed consistent enforcement, which he said would create an even playing field for all.

Traffic had banked up at the Vietnamese border, according to Hok Sovanna, general manager at food importer Mekong Food Group (Cambodia), as importers had to adapt to the new procedures.

“So far people have tried to get some [products imported] unofficially so they can resell them at a reasonable price, but I think if [the law is enforced] like this the price may increase [for consumers] a little,” he said, adding that not much had changed for his organisation because it has always worked within the law.

Ka Bang, a sales manager at Dragon Trading who imports food from Vietnam, Thailand and Malaysia, said he had already seen prices rise.

“We now have strictly 100 per cent full tax, so it means that we have to pay more of the tax bill and it has affected some prices on the market,” he said, declining to comment on rates paid before the clampdown.

The Ministry of Planning’s National Institute of Statistics, which collects food price data, yesterday said that it could not release any information.

National Bank of Cambodia director general Chea Serey, however, acknowledged there had recently been a price hike and that it was being “closely monitored” by the NBC.

Serey attributed the rise to a slowdown in supply due to border delays and “the fact that now importers will have to pay the full amount of tax on imported products”.

“In any reform, there are bound to be unpleasant side effects in the short term, but in the long term, this is good for the economy,” she said, referring to increased government revenues allowing spending on infrastructure and state salaries.

But it is not merely importers feeling the pinch.

“Now not many people are buying as the price of goods is higher,” said Im Moa, a clothing trader at Kab Kor market in Phnom Penh who imports from Thailand and Vietnam.

The balance between fighting corruption and controlling inflation is “very difficult” to manage, Cambodian Economic Association president Srey Chanty said.

Chanty said the government should decrease import taxes for items that lower-income people depend on, such as oil and sugar, and increase rates for products generally purchased by wealthier people, such as electronics.

“These things impact basic commodities, and the poor will be affected the most,” he said.

Cambodia spent about $6.8 billion on imports over the first nine months of this year, an increase of 13 per cent from the $6 billion spent in the same period last year.

Most of Cambodia’s food and beverage imports come from Vietnam and Thailand.

Tran Tu, trade attache officer at the Vietnamese embassy in Cambodia, said the reforms have not only led to price rises but also delays in retailers receiving their goods.

At the Thai embassy’s Office of Commercial Affairs, business support specialist Surachet Maneepong said the official customs duties were now double that of the “traditional” non-official duties.

Thai traders were up in arms, according to Maneepong, as they were not given prior warning of the reforms.

The IMF, which announced last week that inflation would remain stable at 3 to 4 per cent in 2013 and 2014, did not immediately respond to questions yesterday.

The General Department of Customs and Excise could not be reached for comment or confirmation of official rates.

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