The government has extended a suspension of “advance income tax” until the end of 2025 for eligible textile-related enterprises, a good deal of which have been hurt by a drop in orders as a result of global economic headwinds linked to the ongoing Ukraine crisis.
The decision comes after the Textile, Apparel, Footwear and Travel Goods Association in Cambodia (TAFTAC) in October asked the Ministry of Economy and Finance to extend the “Suspension of Advance Income Tax of Enterprises in the Textile and Garment Industry”.
In a prakas that it issued on January 6, the finance ministry noted that at least some of the eligibility criteria are based on scale and scope of operations, sustainability and worker support. It listed textiles, garments, bags, footwear and hats as possible items that can be produced by entities entitled to the tax break.
Cambodia Footwear Association president Ly Kunthai told The Post on January 8 that the move would ease the burden on the sector, which he stressed is experiencing “severe declines”.
“This tax break, although not much, illustrates the government’s focus on the private sector,” he said.
According to Kunthai, the tax break represents just “one per cent” of business expenses, whereas 30-40 per cent declines in purchase orders are not uncommon among these enterprises, putting their workers at significant risk of layoffs.
Worse still, these “sharp drops” in orders will most likely persist throughout 2023, he portended.
“Some factories may be temporarily closed and jobs will be cut, due to the Russian-Ukrainian war’s effects on the incomes of the peoples of Europe and the US, some of our biggest markets,” he said.
Royal Academy of Cambodia economics researcher Ky Sereyvath drew attention to the fact that the Ukraine and Covid-19 crises have weakened global economic growth, driving up prices for fuel and commodities across the world, eroding incomes and forcing consumers to cut back on spending, particularly so in Europe and the US.
“All of these measures taken by the government have truly contributed to the sustainability of industries” as well as to safeguarding local employment, “although global economic conditions have yet to improve”, he said.
Cambodia exported $10.092 billion worth of garments, footwear and other textile-related items in January-November 2022, up 17.62 per cent year-on-year, General Department of Customs and Excise (GDCE) statistics indicate.
The aforementioned category of items, corresponding to chapters 61-64 of the harmonised tariff schedule, accounted for 49.33 per cent of the value of the Kingdom’s total exports over the 11-month period, or $20.458 billion.
In November alone, chapter 61-64 exports came to $757.68 million, down 1.5 per cent year-on-year, but up 7.54 per cent month-on-month, ending a series of monthly declines seen since a peak of $1.320 billion recorded in July.
Overall, the monthly average in the second half of the year (January-November) stands at $927.84 million, up 2.10 per cent from the corresponding figure for the first half of the year, or $908.77 million.