The Ministry of Economy and Finance has installed an incentive program that awards employees of the General Department of Taxation (GDT) a share of the penalties incurred by firms found to have unpaid tax accounts.
Director general of the GDT, Kong Vibol confirmed yesterday that the GDT introduced the incentive program at the beginning of this year. The scheme grants government auditors 10 per cent of the total penalties imposed on any company, which that employee has reassessed and found to be non-compliant.
“The Ministry of Economy and Finance gives incentives to GTD tax auditors who can find more tax revenue, which the tax payers’ under-declared or evaded tax of their payment to GDT. By law whoever under declared or evaded of tax will be penalised,” Vibol said, adding that only auditors were granted the incentive scheme.
“This way government can get more revenue. This incentive will not affect the budget but instead increase the revenue to the government.”
The GDT’s penalties for late or unpaid taxes range from 10 to 40 per cent of the total amount owed to the authority. The penalties also carry a monthly 2 per cent interest charge. Put simply, if a company is found to owe $100,000 to the GDT, the firm could be penalised an additional $10,000 and the auditor will personally receive a $1,000 incentive payout once the company has paid its debts.
“The purpose of this scheme of incentive is to encourage tax auditors to work hard and reward them for those who can find more tax evasion and tax under-declared in order to promote tax compliance and enforcement of law,” Vibol said.
Cambodia’s GDT is on a mission to boost tax revenue to $1 billion by the end of the year.
Kol Preap, executive director of Transparency International in Cambodia welcomed the idea of new incentives for GDT auditors provided there is strict oversight of the employee’s compliance to the Kingdom’s anti-corruption laws.
“It could help them to conduct their work more effectively,” Preap said.
“Additionally, it is important that auditors conduct their assessments in an open and transparent manner. The auditing reports must imperatively be published and the private firms’ financial statements must be disclosed,” Preap said.
During the first Cambodia Tax Summit held at the Sofitel Phnom Penh yesterday, Clint O’Connel, a partner at law firm VDB Loi, said the GDT’s scheme stands to close unpaid tax accounts a lot quicker.
“But unfortunately that also means there is little chance of receiving a waiver of the penalties. You are essentially taking money away from the auditor,” O’Connel told the audience of about 300.
According to O’Connel, the GDT is also currently looking to install a raft of new reforms including a new arbitration committee, which would be charged with resolving tax related disputes.
“It would be the last stop in the government’s audit process,” O’Connel said about the proposed arbitration committee.
“But who will sit on this committee? You don’t want tax officers sitting on this arbitration committee because you want them to be independent.”