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Global crisis slashes Kingdom’s tax revenue

THE Kingdom’s tax revenue dropped over 8 percent last year because of the impact of the financial crisis on customs revenue, a senior Ministry of Economy and Finance official said Tuesday.

A total of US$1 billion was collected by the state in 2009, an 8.25 percent decrease from the $1.09 billion that flowed to its coffers the previous year.

Ministry of Economy and Finance secretary of state Hang Chuon Naron said revenue at the Department of Customs and Excise had decreased, but that more money was collected by the ministry’s Tax Department last year.

“During 2009, the year of the financial crisis, tax revenues increased slightly while customs revenue dropped around 10 percent, as the nation’s GDP growth declined from 10.3 percent in 2007 to 0.1 percent last year.”

The Customs Department generated 13.32 percent less revenue, collecting $640.2 million last year from $738.6 million a year earlier. However, domestic tax receipts increased 2.78 percent to $362.2 million in 2009, up from $352.4 million the year previous, the figures showed.

Still, tax-collection trends were positive, Hang Choun Naron said at a seminar on training assessments for the Ministry of Finance. He said government revenues grew an average of 26 percent annually since the launch of public finance reform in 2005.

“The growth in revenues has gradually increased the government’s reserves in the National Bank of Cambodia to $700 million,” he said. “We have reformed from a state of budget deficit to having lots of cash in hand.”

Overall government expenditure was anticipated to be $2 billion in 2010, up from $1.8 billion last year.

He said he expects tax receipts to increase this year as the economy improves and the government implements several new taxes.

“To meet increasing expenditure, the government has placed a 100 percent tax on luxurious motor vehicles over 12 horsepower. It has also begun a new tax on all land assets, whether or not they have buildings, except land used for agriculture.”

Cambodia Institute for Development Study president Kang Chandararot said customs revenue clearly declined last year.

“As we all know, foreign trade and investments in Cambodia declined last year due to the impact of the crisis, so when imports-exports activities went down, customs and excise collection declined as well,” he said.

He added that domestic tax collection has more room to increase government revenues.

“Internal tax collection will continue to grow if officials strengthen their collection efforts and push more businesses to pay tax, as some of them now try to evade it,” he said.

Pen Simon, director general of the Customs Department and Sim Eang, Tax Department director general, could not be reached for comment Tuesday.

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