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Gov’t says no to calls to raise minimum income tax level

A garment worker checks the stitching on an item of clothing at a factory in Phnom Penh’s Por Sen Chey district in June
A garment worker checks the stitching on an item of clothing at a factory in Phnom Penh’s Por Sen Chey district in June. Vireak Mai

Gov’t says no to calls to raise minimum income tax level

Despite calls from factory representatives and unions to review the minimum threshold for income tax, the General Department of Taxation (GDT) said yesterday it would stick to the $125 tax-free limit.

The Garment Manufacturers Association in Cambodia (GMAC) and the tax department held a workshop in Phnom Penh yesterday aimed at educating factory workers on their tax obligations. The workshop comes days before a new minimum wage rise is expected to be announced.

As wages rise, a growing number of factory workers are earning a taxable rate, but attendees at the workshop called for the threshold to be raised to accommodate modern living costs.

Speaking to about 300 representatives from various unions yesterday, GDT director Kong Vibol ruled out changes to a 1997 tax law that states incomes of $125 or more are subject to taxation.

“We cannot delay any longer because the government needs income to invest in public infrastructure to boost economic growth,” Vibol said.

“Tax collection has been increased over the last few years, but we still need more money to build infrastructure.”

Under the law, income between $125 and $250 will be taxed at a rate of 5 per cent. Income between $250 and $2,125 is taxed at 10 per cent and income between $2,125 and $3,125 is taxed at 15 per cent. Everything above $3,125 is taxed at 20 per cent.

Vibol said yesterday, however, that only workers’ base salaries and overtime wages would be considered taxable; additional benefits such as food and accommodation premiums will be excluded.

“The Ministry of Economic and Finance will promulgate this tax exemption on additional bonuses for garment workers very soon,” he said.

An announcement on a rise to the current minimum wage, now at $100, is due from the Ministry of Labour’s Labour Advisory Committee on October 10. Unions are calling for a raise to $177, while factory representatives say $110 is the highest the industry can sustain.

In anticipation of a wage rise to $125 or more, Rom Phary, one of the union representatives in attendance at yesterday’s workshop, asked the government to restrict tax treatments to the workers’ base salaries.

“Workers have not got a pay rise yet, but the cost of house rental, goods in the market, food and transportation fees has already increased and now we are obligated to pay tax,” she said.
“I wonder if the government has been paying attention to this issue,” she added.

Contacted yesterday, Ath Thon, head of the Coalition of Cambodian Apparel Workers Democratic Union, called the tax law “out of date” and said lawmakers should raise the threshold to $250 to better reflect the current cost of living.

“The law was adopted when the minimum wage was still $30 and now the wage has increased to $100, but workers can hardly survive with the amount as the cost of living keeps getting higher,” he said.

Albert Tan, an executive committee member at GMAC, called on the government to review the 1997 tax law, which he said did not reflect the current economic situation.

“It should be the government’s decision to come up with a reasonable figure for taxation,” Tan said.

“This calculation should be made by the tax department and the Ministry of Economy and Finance.

“The government should see the situation in Cambodia of rising costs of living and a higher minimum wage. The tax obligation should be adjusted to meet current situation, not fixed to 15 years ago,” he added.

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