The government has called on businesses to be more transparent in declaring their revenues for tax purposes or risk facing severe penalties.
Speaking at a seminar on Monday to promote awareness of corporate tax obligations for Cambodian businesses, Kong Vibol, director-general at the General Department of Taxation (GDT), told the audience of more than 350 businesses that the GDT were clamping down on those who were underreporting their profits to avoid paying tax.
“If found misreporting revenues, the GDT will first warn the business to come forward and pay the amount they are supposed to pay. If the business chooses to ignore the warning, they will face their property being seized, cash in the bank being frozen, [named in] the news and, in the worst case, sent to court,” he said.
In particular, Vibol took aim at the hotel industry that he said was underreporting their revenues during the high season.
“Some hotels reported that they can sell 20 rooms only during the high season for tourists, while the truth is almost all their 100 rooms are being sold out. Some even reported losses in revenues, but keep asking for expansion,” he said. “We find this illogical.”
Vibol said his department’s auditors had the ability to identify underreporting, but for the fairness of competition encouraged businesses to be accurate with their reporting.
Cambodia’s corporate income tax rate stands at 20 per cent. The call to increase transparency is an effort among reforms in the Tax Department that saw revenues increase by 18 per cent in 2014, to more than $1 billion.
Luu Meng, president of the Hotel Association, said yesterday that many hotels were paying tax, but a lack understanding of their exact obligations was the cause for underreporting.
“Once there is enough awareness, they will not violate the law,” he said.
Knowledge and benefits of formal business practices like book keeping, and even registration, remains limited among many small businesses according to Morm Peth, a project manager at the Federation of Associations for Small and Medium Enterprises. This means that it is difficult to capture correct tax revenues, he said.
“Once we can encourage them to register, the government will no longer have concern about them not paying tax.”