Inspired by Australian mining regulations, the Cambodian government is considering a raft of changes to the mineral resources mining law, including a rethink of the sector’s comparatively high tax rate.
Citing discussions held with Western Australia state mining industry representatives last week, Meng Saktheara, secretary of state at the Ministry of Mines and Energy (MME), said Cambodia’s 30 per cent tax on mineral resources, mining, and oil and gas operations was outdated.
“From my perspective and to be fair to both sides, I would say the current 30 per cent tax rate should go down to about 20 per cent,” Saktheara said, adding that his ministry was yet to speak with the Ministry of Commerce regarding any proposed changes.
Saktheara made the comments after returning from a weeklong fact-finding tour of Western Australia and its mining sites. The visit was organised in part by the Western Australian government’s International Mining for Development Centre.
Last week, Australia’s coalition government officially scrapped the country’s controversial mineral resources rent tax (MRRT), which was implemented in 2012 by the previous government. The MRRT placed a 22.5 per cent levy on mining companies’ profits above A$75 million (US$70 million).
“We spoke with private sector representatives [during the tour] and they clearly were not happy with the mining tax. The government abolished it, so it is a good lesson to learn from a country that has learnt from the policy,” Saktheara said.
“I think it is time to rethink our fiscal policy and to adopt international best practice – one that ensures revenues both for the government and does not jeopardise private investment.”
In what appears to be a replication of the Australian taxation system, Saktheara said the Cambodian government would consider a higher tax rate for oil and gas firms. Australia taxes oil and gas mining operators at 40 per cent.
Taxation issues continue to stall negotiations between the Cambodian government and Chevron over a 4,700-square-kilometre site called Block A in the Gulf of Thailand, which was declared economically viable by the energy giant in 2010.
Saktheara said the proposed changes would not expedite or delay negotiations with Chevron over the site.
A full oil and gas extraction law and new mining licensing regulations will also be drafted by the end of 2015, according to Saktheara, with laws surrounding worker safety, social responsibility and biodiversity also in line to be strengthened.
Mam Sambath, executive director of extractive industries NGO Development and Partnership in Action, was cautious about the government’s latest approach and called for more community and cross-ministry consultation.
“Reforms are important and they need to be done. But a thorough assessment of the communities affected by mining operations and the environmental effects must be made first,” he said.
“The MME needs to cooperate with the Ministry of Agriculture, the Ministry of Environment to really understand how communities’ livelihoods and the surrounding environment is being affected by incoming mining industry.”
During its seven-day Australian tour, the Cambodian delegation held meetings with the Western Australian government’s Department of Mines and Petroleum, private sector representative body the Australian Petroleum Production and Exploration Association, law firm Hunt and Humphrey Lawyers and accounting company Pricewaterhouse Coopers.
Contacted yesterday, delegation industry representative Richard Stanger, president of the Cambodia Association for Mining and Exploration Companies, declined to comment on the potential changes to the Kingdom’s resources mining sector.