Logo of Phnom Penh Post newspaper Phnom Penh Post - Finance official says money may run out next year

Finance official says money may run out next year

Finance official says money may run out next year

T HE Royal Government's 1997 budget projects a $218 million deficit and while foreign

financing will cover an anticipated $230 million shortfall, at least one observer

is concerned the government may still run short of money.

"1997 will be a difficult year because revenues are very optimistic," a

senior Finance Ministry official said, adding the 1997 budget expects a 27.6 percent

increase in tax revenues on 1996 based on a radical reform of tax collecting procedures.

Although the impact will not be felt until 1998, the entire tax system is slated

for reform which includes the imposition of taxes on salary, turnover and luxury

goods.

A value added tax (VAT) is scheduled for introduction in 1998.

However, the Finance Ministry official argued that any tax system would fail if the

government did not put a stop to the widespread practice of "extra-legal"

exemptions.

Another problem was the reliance on duties to raise revenue with taxes from customs

makes up 65 percent of overall tax revenues.

"This is not a good structure," the official said. "Cambodia must

reduce its tariffs when it enters Asean, which means that the entire tax system must

be restructured.

He said Cambodia could simply not afford to offer investors further tax concessions.

The 1997 budget projects domestic revenues to reach 896.4 billion riel ($332 million),

up 12.4 percent from the 1996 budget. "This is an improvement, but still low,"

the official said.

Tax revenues represent 7.3 percent of GDP, up slightly from 7.1 percent in 1996 -

a very low figure when compared to others in the region. Tax revenues range from

15-21 percent of GDP for Asean countries, including Vietnam.

Money from non-tax revenues are projected to total 211 billion riel in 1997, down

from a projected 220 billion riel.

Revenues from forestry concessions are projected to total 25.8 billion riel in 1997.

The official called this "optimistic", considering the dramatic slide in

these revenues since 1994. They totaled 86 billion riel ($35 million) in 1994, 52.9

billion riel ($21 million) in 1995, and an estimated 23.2 billion riel ($8.5 million)

in 1996.

The 1997 budget projects about $450 million in total expenditures - representing

a 6.1 percent increase on 1996 - and allows for a 1.9 percent increase in current

expenditure including salaries.

The budget projects $150 million for defense and security spending, down from about

$180 million in 1996 in the first reduction since 1993, but still representing a

third of all government spending.

The Finance Ministry official explained defense and security spending was not reduced

further in order to cover the expense of integrating Khmer Rouge defectors.

Spending on health and education are both to be increased by 6 percent while agriculture

is slated to receive a boost of 17 percent.

Foreign financing of the Cambodian national budget is up slightly to approximately

$230 million or about 51 percent. Foreign financing provided 43 percent of total

expenditures in 1993, 45 percent in 1995, and 42.5 percent in 1996.

However, the nature of foreign financing is changing - from 1994- 1995, donor funds

covered the operating costs of the government, local small-scale investment financing,

large-scale financing, and interest and the amortization of debt.

But foreign financing in 1997 will cover only direct financing of small-scale and

large-scale projects, prompting a need for the government to be more fiscally disciplined.

MOST VIEWED

  • Prince injured, wife dies after accident

    THE wife of former First Prime Minister Prince Norodom Ranariddh, Ouk Phalla, 39, died while the prince was “severely” injured following a road accident in Preah Sihanouk province’s Prey Nub district on Sunday morning, officials said. Rananriddh, who is also the president of the Funcinpec

  • Guards protest dismissals, reject claims of sharing naked photos of child

    Some 20 former security guards at the US Embassy in Phnom Penh protested on Tuesday against their dismissal. They accused their employers of falsely claiming they had viewed and shared child pornography from their mobile phones as grounds for their termination. In total, 32 personnel were dismissed

  • Bun Heang mocks US, threatens its citizens in scathing open letter

    After being hit with sanctions from the US Department of Treasury, Cambodian General Hing Bun Heang said he would retaliate against any US national who does not respect his country’s sovereignty, has ambitions to invade Cambodia or incites “traitors” in the Kingdom to do

  • Funcinpec urges probe into deadly Preah Sihanouk accident

    THE Funcinpec party has urged the government, especially the Ministry of Interior, to investigate the traffic accident in Preah Sihanouk province which left Prince Norodom Ranariddh badly injured and his wife Ouk Phalla dead. Funcinpec Vice President You Hokry told reporters at Botum Votey pagoda,