The government’s decision to extend Covid-19-related tourism tax breaks and incentives till end-2022 to alleviate pressure on distressed businesses is key to the recovery and continued sustainability of the sector, as the domestic and international tourist markets gradually return to normal, insiders have said.
In an October 25 notice, the government announced that it will continue to exempt certain General Department of Taxation- (GDT) registered tourism businesses from all monthly taxes – except for value-added tax (VAT) – for another three months to December.
After the government moved to allow the full resumption of socio-economic activity late last year, manufacturing and other major sectors have staged a strong comeback, as reflected in growing consumer demand and exports, although tourism still lags behind, the notice recapped.
It said that despite a rising number of tourists, the sector has seen limited growth and even faces other socio-economic risk factors – such as inflation and fallout from the Ukraine crisis – which has had a negative impact on the short- and medium-term sustainability of tourism-related businesses.
“To better improve the balance of business in hard-hit sectors, it is necessary to lay out extra measures to maintain control of these impacts and support recovery in the tourism sector under these difficult circumstances.
“We will exempt GDT-registered hotels, guesthouses and travel agencies with business operations in Phnom Penh as well as Siem Reap and Preah Sihanouk provinces from all taxes except for VAT for another three months, from October to December 2022,” the notice said.
These businesses are still obligated to file taxes by March 2023, and use the e-VAT system every month during this period.
The notice also encouraged tourism businesses to prepare skills development courses for their employees, and reminded them that they can request financial support from the Skills Development Fund (SDF) if necessary. The SDF is an industry-driven workforce development programme initiated by the Ministry of Economy and Finance.
It added that the government will also continue to closely monitor the Covid-19 situation and the socio-economic and financial situations across the globe to examine and assess the impacts of the disease and prepare to update or lay out more measures.
Khieu Thy, president of the Siem Reap-based Angkor Tourist Guides Association, praised the latest extension as an essential move, telling The Post on October 26 that tourist numbers are now 20-30 per cent compared to peak season in 2019, a record-breaking year.
He underscored that the tax breaks would provide a lifeline for accommodations and eligible businesses until customers reach pre-pandemic levels. “The continued tax exemptions over the past two years have helped tourism companies stay afloat, keeping them from permanently shutting down,” he said.
Holidaymakers visiting the northern cultural province of Siem Reap these days are “mostly” from India, the US and Spanish-speaking countries, he said, noting that the number of Chinese visitors is “small”.
Preah Sihanouk provincial Department of Tourism director Taing Sochet Kresna commented that tourism businesses in the three localities covered by the extension received plenty of international tourists in pre-Covid times.
He said the tax exemptions have saved owners a lot of money, which they can use to support their businesses and keep employees’ skills and knowledge up to date.
“The government’s continued support for tourism has been a huge leg up [for businesses] to stay alive and prepare for the return of tourists to Cambodia after the Covid-19 pandemic, amid an improved global economy,” Sochet Kresna said.
For reference, ministry figures show that Cambodia welcomed 998,272 international arrivals in the first eight months of 2022, up 720 per cent year-on-year, albeit down 77 per cent from the same time in 2019. August alone accounted for more than a quarter, at 254,813, up 7.65 per cent over July (236,697), which was up 44.95 per cent from June (163,298).
Of note, if the number of international visitors for each remaining month this year is equal to or greater than the August figure, the full-year total would top 2.017 million, or more than the two-million upper bound of the estimated range offered by the ministry as recently as September.
Cambodia logged just $184 million in international tourism revenue last year, down 82 per cent from $1.023 billion in 2020. Last year’s figure was down more than 96 per cent from the all-time peak of $4.919 billion in 2019, which was up 12.4 per cent over 2018.
The tourism and travel industry accounted for 1.8 per cent of gross domestic product (GDP) in 2021, down from the three per cent and the whopping 12.1 per cent recorded in 2020 and 2019, respectively.