Revenue from property tax accounted for 0.1 per cent of gross domestic product (GDP) which is very low compared to other countries in the region, an International Monetary Fund (IMF) working paper said.
The 26-page paper, which was published last week, evaluates “the impact of fiscal reforms on growth and inequality in Cambodia” and cites comments and discussions with the National Bank of Cambodia, Ministry of Economy and Finance and Cambodia National Institute of Statistics.
It shows that the Kingdom’s revenue relies relatively little on progressive income sources such as personal income, capital gains and property taxes.
“This is despite the progressive profile of property taxation, which is predominantly levied on richer households in urban areas.
“We find that using property taxes delivers the largest increase in GDP and reduction in inequality,” the paper said.
Advance Real Estate Co Ltd founder and CEO Po Eavkong said land pricing not being in line with the real market could be a factor causing lower tax collection in the sector.
“In principle, property taxes are not levied on farmlands, which have now mainly become commercial lands without updating their statuses. So the state has to adjust prices according to the market,” he said.
Cambodia’s revenue mobilisation has improved markedly in recent years. While tax revenue accounted for less than 10 per cent of GDP in 2007, the 2017 figure increased to around 17 per cent which is among the highest levels in Asean.
Out of total tax revenue, which accounts for 16.9 per cent of GDP, 61 per cent is generated by the Value Added Tax (VAT). This is a relatively high rate compared to regional peers, Laos and the Philippines.
VAT is usually considered among the most regressive sources of taxation since consumption makes out a larger share of income for poorer households.
Revenue from personal income taxation and capital income and capital gains only make up 4.2 per cent of GDP in Cambodia, which is the lowest among peers.
The government has adjusted Phnom Penh’s land prices for a new registration tax base that commenced in July to boost state tax income.
According to the change, average prices have been increased by more than 30 per cent per square metre on current prices.
General Department of Taxation (GDT) deputy director-general Ken Sambath said at a seminar in April that the government last year received $97 million in registration tax revenue from ownership transfer and property rights in Phnom Penh alone.
In the first three months of this year, the tax income collection amounted to $24 million, he said.
GDT director-general Kong Vibol could not be reached for comment on Thursday.
In the first seven months of this year, tax collection reached more than $1.7 billion, a year-on-year increase of 28 per cent, according to a GDT press release.