Revenue from tax collection jumped 25 per cent in 2015, government officials revealed yesterday, saying the tax department has collected about $1.3 billion on the back of better compliance and awareness among the private sector.
At a seminar in Phnom Penh, Kong Vibol, director of the General Department of Taxation (GDT), said the increase was not a result of an increase in the tax rate, which has remained unchanged, but rather that businesses are now more aware of their tax obligations, helping boost collection this year.
“We want the private sector to understand their tax obligations and we encourage more of them to register with the tax department and get involved in the culture of paying taxes,” Vibol added.
The increase in tax collection comes as welcome news for the Cambodian government, which has earmarked $4.3 billion in spending for 2016, up 12 per cent from last year, according to the recently passed national budget.
Last month, the department announced the abolishment of the so-called estimated tax regime, which will now put all taxpayers under the “real” regime, which will have stricter reporting and audit requirements.
Vibol said there was a need to educate some companies that weren’t aware of the tax laws in the Kingdom, however, he added, that there were other companies that were simply not fully complying with the tax regulations.
“The workshop today is to inform the private sector about the tax on profit, their obligation to declare tax on profit, as well as make them aware of facilities like paying taxes online,” he said.
For the upcoming year, Vibol said the department expected to increase its collection to $1.5 billion, adding that the tax on profit could fuel this increase.
Lim Heng, vice president of Cambodia Chamber of Commerce, said that while awareness was increasing in the major cities, the tax department needed to increase tax education in other provinces, where businesses were less aware of their responsibilities.
“The tax law is not explained well. The tax department needs to cooperate with provincial chambers of commerce in provincial to spread the message to all enterprises,” Heng added.
The Industrial Development Policy, which was released in August, underscored the need to officially register 80 to 95 per cent of small and medium enterprises (SMEs), out of which 50 to 70 per cent will have accurate accounts and balance sheets Te Taing Por, president of the Federation of Associations for Small and Medium Enterprises in Cambodia, said the government needs to give SMEs more time to adopt and comply with tax procedures.
“Some of them just know about taxes, but they are still not clear,” he said. “They need time to adapt and prepare, and we should not rush into it.”
CNRP chief whip and opposition lawmaker Son Chhay said that even though tax revenues have increased, the tax department needs to use more information technology tools to improve collections, particularly with respect to value-added and property taxes.
“The collection is not uniformly implemented, as big enterprises still owe the government back taxes and most tax collectors just try to collect the planned tax collections for the year,” he said.
According to Chhay, a 25 per cent increase was not reflective of an economy that was growing at 7.2 per cent annually, and that there needs to be increased transparency when it comes to the functions of inspectors and auditors.
Last week, the General Department of Taxation issued a warning to five private sector companies to pay their taxes or face legal action. Kong Vibol told the Post yesterday that the tax department has informed these companies, but so far none had responded to the notice.
“We inform the companies to come and pay the tax through media, but so far there is no response,” he added “We know where they are already, so we will take action through the judicial system.”
The five companies are CTPS Chantechnical Power Sevices, Kron 2010, Techie Succeed Service, Phalla BCT Group and S-Zone. Vibol adding that the companies were not only evading their taxes, but were also issuing checks that were bouncing.