Owners of vehicles with a model year before 2021 that were brought into Cambodia without paying import duties or other charges can reduce any levy obligations by 10-20 per cent if they pay them before the end of this year, according to an October 12 letter from General Department of Customs and Excise (GDCE).

Signed by director-general Kun Nhem, the letter said reductions in import taxes and other duties would be granted on a tiered scale based on the vehicle’s model year as follows: 20 per cent (prior to 2016), 15 per cent (2016-2018) and 10 per cent (2019-2020).

The move aims to bolster transparency in tax matters and improve national income, the GDCE said, adding that the cutbacks would promote a smoother and more equitable process of fulfilling tax obligations.

It rationalised the tiered reductions by suggesting that a large portion of owners of older vehicles would likely be facing financial difficulties in fulfilling outstanding duty and tax obligations.

Owners of most right-hand drive vehicles, however, must still convert them to left-hand drive by June 30, 2022 or risk having them seized, dismantled or destroyed. Mobile cranes weighing over 20 tonnes are a notable exception to the rule, as noted in a September 4, 2008 letter from the Ministry of Economy and Finance, the GDCE’s parent ministry.

The GDCE on September 9 said it would also waive related fines and other penalties until June 30, 2022.

And in Letter No 2076/21 dated September 22, the GDCE instructed customs and excise departments to report overpayments of duties and taxes, to review and determine a course of action on a per-case basis.

Preap Tith Ratana, owner of vehicle importer RVG, noted that the adjustments would benefit a fair share of owners of imported right-hand-drive vehicles, as well as left-hand-drive ones brought in for the Royal Cambodian Armed Forces and National Police who have yet to pay their respective taxes owed.

He voiced general support for relaxations in customs rules, “as a legal vehicle importer”, noting that used cars would account for virtually all of the vehicles owned by beneficiaries of the latest scheme.

He underlined that the discounted rates would reduce the ratio of vehicles in the Kingdom with unpaid duties and provide a boost to state coffers. “Whether you like it or not, it should be reduced,” he asserted.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, emphasised that although the proportion of vehicles with outstanding tax issues was relatively small, every little bit contributes to keeping the economy ticking.

He said the scheme would “inspirit” vehicle owners to pay their dues, pursuant to applicable laws and regulations.

“When one refuses to pay up, it results in a loss for national income and affects public order, and what the GDCE is doing is ensuring equality in the nation, that is except for vehicles that serve state agencies or those used to transport distinguished international guests,” Vanak said.

Covid-19 has amplified the state’s need for revenue, he said, analogising payment of these fees with pouring money into the development of infrastructure and other services for the people, and contributions to the achievement of economic growth, he said.

The GDCE collected $1.1595 billion in revenue in the first half of 2021, down 8.9 per cent year-on-year.

Vehicles and machinery topped the list of sources of customs and excise revenue at 42.3 per cent, followed by petroleum and energy (23.5 per cent), and construction materials and miscellaneous fees (6.2 per cent), with other products accounting for 28 per cent, GDCE data indicate.

Last year, the GDCE collected $2.4196 billion in revenue, down $795.5 million or 24.8 per cent compared to 2019. This was equivalent to 83.5 per cent of the 2020 plan.