The prolonged spread of Covid-19 continues to dismantle the Cambodian restaurant industry. New research from the Cambodia Restaurant Association (CRA) shows that sales have been decimated by the pandemic, dropping 50 per cent last year over 2019 and now 60 per cent lower than 2020 levels.
This represents a cumulative 80 per cent drop over 2019-2021.
Speaking at the “First Webinar on Taxation for Restaurant” on August 23, CRA chairman Arnaud Darc cited a laundry list of issues hampering the industry, as reported by restaurant owners over the last 16 months.
Some of these are the abrupt lack of consumer demand brought about by Covid-19, the imposition of rules that forced dine-in establishments to change the way they conduct business, and a work-from-home trend that has all but eliminated the lunchtime crowd for traditional restaurants and quick-service restaurants (QSR).
CRA estimates that the share of consumers dining at sit-down restaurants had declined by 85 per cent since the pandemic began, he said. “We note that traffic isn’t merely shift[ing] to take-out – we estimate that only 16 per cent were ordering in more to replace eating out in traditional restaurants.”
Darc said the reverberating effects felt across the Kingdom’s restaurant scene has been devastating for owners and workers. The industry essentially ground to a halt, pressuring businesses to make a U-turn and figure out how to add curbside pick-up and delivery to operations, turn their kitchens into “ghost kitchens” and make meal kits, he said.
“We can’t change the crisis, the closures, or the course this is going to take, but they can and have shifted their operations and will likely continue doing so long after this pandemic has passed.
“While the restaurant industry has been affected by the pandemic, we note, the real impacts can be hard to measure because the effects have been far from evenly meted out,” Darc said.
On the other hand, he said, street food carts, fast food establishments and over-the-counter food services are some of the businesses better coping with the current set of circumstances, mainly due to the reduced need for staff, as well as the affordability of their products and how easy they are to pack.
“Since the beginning of the pandemic, half the SMEs [small- and medium-sized enterprises] in our industry have disappeared and we are still expecting to see more closures in the short future,” he said.
Presiding over the webinar, Eng Ratana, director of the Large Taxpayer Department under the Ministry of Economy and Finance’s General Department of Taxation, noted that economic activity had suffered a Covid-driven slowdown and that the restaurant industry was no exception.
To remedy the setbacks of the crisis and help business owners during these tough times, the government has adopted a number of intervention measures, he said.
“The economic situation has deteriorated significantly, and has severely affected tax revenue collection. However, we do appreciate the private sector for nonetheless complying with the law and paying responsibly and on time.”
Anthony Galliano, group CEO of Cambodian Investment Management Holding Co Ltd (CIM Holding), said the hospitality sector is rapidly shrinking, despite government support, and stressed that there needs to be a recovery plan that includes tax incentives to stimulate investment that fosters longevity and sustainability.
The “silver bullet” could be to refine the small taxpayer status, which offers substantial tax benefits and advantages, he said, noting that while not stated in the law, it is virtually impossible for foreigners to register as small taxpayers.
Given that small taxpayers charge value-added tax (VAT) at 10 per cent but only pay over two per cent, pay no withholding tax except on rent and salaries, have a simple tax form, have lower profit tax tiers, lower patent tax and are not prone to audits, this could be the most appropriate model to relaunch the industry, he suggested.
“The government should consider allowing foreigners in practice in this category, expanding the threshold to $500,000 in revenue, and allowing limited liability companies as a means resurrecting the industry, encouraging investment, and promoting durability in an industry that has a fail rate of 60 per cent in the best of times,” Galliano said.