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Logo of Phnom Penh Post newspaper Phnom Penh Post - Income tax law nears House

Income tax law nears House

EMPLOYEES in Cambodia may soon be paying income tax for the first time. Finance

Minister Sam Rainsy says a bill introducing taxes of up to 30 percent will go

for approval by the National Assembly this month. But taxpayers may have the

bitter pill slightly sweetened with the news that import tariffs on some goods

will be slightly lowered.

The Finance Minister said the current proposed

tax bands are 5 percent on monthly salaries of between $300 and $400, 15 percent

for salaries between $400 to $4,000, 20 percent on $4,000 - $8,000 and 30 for

monthly salaries over $8,000.

Rainsy also scotched reports that tariffs

on a wide range of goods, including alcohol and tobacco, would be increasing by

up to 50 percent. He said: "The duties mentioned in the reports were introduced

a year ago."

In an interview with the Post, Rainsy also said there are

continuing differences between the Finance Ministry and the National Investment

Council (NIC) with writing competing drafts of a new investment law. Rainsy said

he hoped the conflict was nearing an end.

Rainsy said he had given his

draft to Co-Prime Minister Prince Norodom Ranariddh, and a meeting of the

Cambodian Development Council would take place shortly to make a final draft

acceptable to all parties.

The Finance Minister said: "The NIC draft

needs assessment and amendment, they need to take into account the constructive

criticism I have offered."

A report by the International Monetary Fund on

the NIC draft obtained by the Post also voiced concerns. The report said the

Government had indicated that its investment law would "place no restrictions on

investment by private Cambodian or foreign entities, except where expressly

prohibited by law."

The report said this approach implied automatic

investor approval in most instances - apart from cases involving incentives -

giving the Cambodian Investment Board an advisory role. However, the NIC draft

was a "clear departure from these principles". The report detailed four main

areas where the NIC draft does not accord with the government's

indications.

In summary these are: firstly, no public agency should

analyze or evaluate privately funded projects and publicly funded projects which

come under the Planning Ministry's jurisdiction. Secondly, there was no need for

private investors to provide profitability and feasibility studies.

Thirdly, the Cambodian Investment Board should not make socio-economic

assessments when granting investor approval as this was covered by the

Government's national budget, especially the public investment program.

Fourthly, possible fiscal incentives for private investment should not

be included in the law.

Meanwhile, a Finance Ministry official denied

reports of a widening trade gap though Cambodia's lack of a manufacturing base

was an "obvious problem".

The official said the closure of the Poipet

border crossing in March had some economic effect but this year's expected

growth figure of 7.5 percent was still valid, although subject to mid-term

review.

Customs Director Uy Sambath also denied reports of tariff rises

of up to 50 percent, saying for most goods they are set to drop. He said he

expected the rate on cigarettes, alcohol and cars to remain the same.

Uy

Sambath said: "On other goods import tariff rates will be lowered by about five

percent and the consumption tax rate will remain the same at four

percent."

The new tariff rates will not come into effect for a few months

as the Customs Department is spending two more months finishing its proposal

before it is sent to the Council of Ministers and the National Assembly.

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