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Logo of Phnom Penh Post newspaper Phnom Penh Post - Tax revenues rise, but aren’t reflective of overall GDP growth

Tax revenues rise, but aren’t reflective of overall GDP growth

Tax revenues rise, but aren’t reflective of overall GDP growth

While the country’s tax revenue grew about 20 per cent in the first half of this year compared to the same period in 2012, experts say the amount still isn’t high enough to accurately reflect the country’s GDP growth.

According to data from the General Department of Taxation, total tax revenue in the first six months was $470 million, compared to $388 million from January through to June last year. As for the different sources of the total, salary tax revenue went up 24.8 per cent, income tax jumped 28.6 per cent, Value Added Tax [VAT] increased by 12.2 per cent, and special tax, referring to items such as cigarettes and entertainment, went up by 17.5 per cent.

The report also listed the increase in tax collection by industry. When compared with the first six months of 2012, the largest this year, by far, was the education sector, which went up 124 per cent. Tax revenue from Cambodia’s largest export industry, the garment sector, rose about 42 per cent, while consumer products added nearly 38 per cent. Hotel and questhouse revenue rose by roughly a quarter.

Keat Chhon, the Minister of Economy and Finance, repeated an explanation for previous increases in the last several months, that tax officers had stepped up efforts to make collections and had improved the quality of their work. He did, however, add that the tax department still lacked efficiency.

Stephen Higgins, former CEO of ANZ Royal bank ,said that country’s nominal GDP growth was probably about 11 per cent over the same period, “which would suggest the government overall hasn’t managed to increase revenues as a proportion of GDP, which is a little disappointing after the progress they seemed to make last year”.

“The International Monetary Fund has been pretty clear that what they call revenue mobilisation, or lifting the tax take, needs to improve. Corruption is a factor, but also building up capacity and capability in revenue raising areas is important,” he said in an email message. “Improving and streamlining customs would make a big difference, and is something that most businesses would want to see,” he added.

Hiroshi Suzuki, CEO and Chief Economist of the Business Research Institute for Cambodia (BRIC), said in an interview last month that beefing of tax collection is not a quick fix, and other countries face the same problems.

“The improvement of taxation is not an easy job. Many developing countries, not only Cambodia, have been tackling this issue. I hope both the government and donors will continue their efforts on this issue for Cambodia,” he said.

Lawmakers from the Cambodia National Rescue Party consistently claim that the government loses about $500 million every year via its poor tax collection and corruption.

Last year the government collected $740 million, according to the department’s official data.

Cambodia’s economic growth is forecast at 7.2 per cent in 2013. The Asian Development Bank said it could pick up to 7.5 per cent next year once economic recovery in Europe and the United States takes hold.

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