Logo of Phnom Penh Post newspaper Phnom Penh Post - Soft tax approach sends mixed signals

Soft tax approach sends mixed signals

A motobike passes in front of a Tax Department branch office in the capital’s Chamkarmon district earlier this year.
A motorbike passes in front of a Tax Department branch office in the capital’s Chamkarmon district earlier this year. Hong Menea

Soft tax approach sends mixed signals

The Tax Department has announced a one-month extension to its traditional March 31 deadline for companies to submit their annual corporate tax filings – an unprecedented last-minute move that some legal experts argue could be sending the wrong message to taxpayers.

In a Facebook posting issued after the annual deadline elapsed on Friday, the General Department of Taxation (GDT) announced that companies would be given until April 30 to file their annual tax statement without penalty. It said the extension would allow companies to better comply with proper filing procedures.

“In the past, the GDT has noticed that some management and accounting records for tax declarations and revenue taxes are correct, while other companies ask for additional time to correct accounting records time and time again” after the deadline, the statement read.

“The deadline has been extended subsequently so that companies can make corrections and be compliant.”

The announcement was met with immediate criticism on social media, with many questioning why the government announced a last minute delay after many corporations rushed to finalise their annual filings in order to avoid stiff fines and penalties.

“Good news, but why so late to release? This is just giving luck to those who submit late,” said one online commentator. Clint O’Connell, head of Cambodia Tax Practice at foreign investment advisory and tax firm DFDL Cambodia, said that such a late announcement and a long extended window for filing “has never happened before”.

“Sometimes they have extended it by a couple days if March 31 falls on a weekend, but never by a whole month,” he said.

Nevertheless, he said the reasoning behind the announcement was clear. He explained that the government was now in its first full year since abolishing its poorly regulated and grossly inefficient estimated-tax regime, and was enforcing its more-stringent real tax regime on all companies, including small and medium-sized enterprises (SMEs) that previously paid little or no taxes.

“This delay is primarily geared for SMEs who are now entering the real regime and this is giving them a break as they transition and become first-time filers,” he said.

However, the one-month filing extension could serve another purpose, O’Connell speculated. He pointed out that in January, the GDT announced a general amnesty for companies that had operated under the estimated regime, allowing them to correct their statements without fear of being slapped with retroactive tax bills.

“Since the tax amnesty was announced, it has created a great deal of confusion among the business community,” he said. “And a delay may help some of them enter into the amnesty agreement.”

While O’Connell said the GDT was showing great “leniency” in delaying the annual tax deadline, he argued that it could end up being a double-edged sword.

“Existing taxpayers may not be happy with this, but the government needs to encourage SMEs to comprehend the real regime,” he said. “However, there is a danger when companies think that they can rely on the extensions and get preferential treatment.”

Anthony Galliano, CEO of Cambodian Investment Management, said that the timing and nature of the announcement was the latest example of GDT officials coddling irresponsible behaviour.

“The extension of the deadline, after the deadline already passed, is another example of the GDT pandering to non-compliant taxpayers and sending disconcerting signals to those that are striving to be fully compliant,” he said.

Galliano said that in the spirit of the amnesty program and the recently announced incentives for non-compliant SMEs, which are encouraged to voluntarily enter into the real regime with a two-year tax holiday, “it appears the GDT is more fixated on reigning in non-compliant businesses with the carrot and compliant taxpayers with the stick, through increased audits”.

He added that despite the chaos at banks and tax branches on Friday as many companies scrambled to file their taxes ahead of the deadline, he expected some of these companies would be relieved by the one-month extension as it would give them time to amend and re-file their tax statements.

“I expect a good deal of re-filing as those taxpayers will take a second look at what may have been filed in haste, sacrificing accuracy for timeliness,” he said.

MOST VIEWED

  • PM: West unfair to Cambodia

    Prime Minister Hun Sen released a message celebrating the International Day of Peace on Monday, saying that some major powers and western countries had been systemically cooperating to put political pressure on Cambodia as they did in the 1970s and 1980s. Hun Sen said pressuring

  • ‘Bad news is an investor’s best friend’ – unlocking investment potential in Cambodia

    It is time to shop. Economic woes provide good pickings for investors if they know where to look The poem If, written by English Nobel laureate poet and novelist Rudyard Kipling for his son circa 1895, is widely perceived as fatherly advice for John who would

  • PM requests Russia’s Covid vaccine

    Prime Minister Hun Sen has requested that Russia provide Cambodia with its Covid-19 vaccine after the former announced it planned on mass vaccinating its population next month. The request came on Thursday through the prime minister’s Facebook page as he met with Anatoly Borovik,

  • First ‘mobile kitchen’ in Cambodia enters service

    A catering company recently rolled out Cambodia’s first “mobile kitchen” – a $50,000 container capable of serving up to 200 people at a time. The kitchen is the brainchild of Seng Hok Heng Catering Services. At 4.4m-high, 6.8m-long and 2.4m-wide (expandable to 6.8m), the kitchen is equipped

  • Kingdom, China rebut basis for US sanctions

    The Council for the Development of Cambodia, the Ministry of Foreign Affairs and International Cooperation, and Tianjin Union Investment Development Group Co Ltd (Tianjin) have responded to US sanctions on Union Development Group Co Ltd (UDG), a Chinese-owned company currently developing the sprawling $3.8 billion Dara

  • Influenza breaks out in eight provinces

    Nearly 600 people have been infected with influenza in eight provinces in the past month, Ministry of Health spokesperson Or Vandine said. The ministry is advising extreme caution. A report released by Vandine on Saturday said the Ministry of Health observed transmissions of influenza between August 15