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Struggling textile industry gets reprieve with new tax breaks

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In a move aimed at keeping the garment industry afloat, the government has offered sweeping tax rates to qualifying companies. Post Staff

Struggling textile industry gets reprieve with new tax breaks

The government has decided to waive 50 per cent to 100 per cent tax on the textile industry for six months as a means of easing its financial burden, stated a Ministry of Economy and Finance prakas.

Enterprises whose income is expected to experience 20 per cent to 39 per cent drop will benefit a 50 per cent tax exemption whereas companies which anticipate more than 40 per cent impact are given a full waiver.

The prakas, signed by minister Aun Porn Moniroth, was issued to mitigate challenges in Cambodia’s largest economic sector. It listed several requirements companies must fulfill in order to qualify for the exemption.

The companies must produce documents that show actual impact to their income due to the partial suspension of the Everything But Arms (EBA) scheme preference when submitting their tax declaration forms, the prakas stated.

Early this year, the European Commission decided to partially suspend the EBA starting August, which would affect 20 per cent of export comprising clothes, footwear and bags to the European Union. The total value of that export amounts to over $1 billion a year.

Garment Manufacturers Association in Cambodia deputy secretary-general Kang Monica told The Post that the income tax exemption might not ease much of the industry’s burden which is already impacted by the loss of business from order suspensions due to the Covid-19 outbreak.

“Garment enterprises do not expect to be profitable this year. The big challenge now and in the near future is cashflow as we cannot deliver the goods to the buyers and we might not receive any cash payments. Therefore, factories will not have money to pay salaries,” he added.

Cambodian Labour Confederation president Ath Thon opined that the tax measure would partially offset the textile industry’s impact in Cambodia.

“The sector is experiencing a poor demand due to the suspension of orders by buyers. I think that if there is no market [to sell, we do not know where products would go. This can lead to unemployment soon,” he said.

Last year, Cambodia exported $1.2 billion worth of travel products compared to $600 million in 2018.

Overall, the nation’s exports amounted to $14.6 billion in 2019, up 12.7 per cent from 2018, whereas imports grew 18.6 per cent to $22.3 billion from a year ago.

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