The Editor,

No one is obliged to pay the public more than the extent

required by law. What are the repercussions for individuals and entities who

fail to meet their tax obligations at the Tax Department of the Ministry of

Economy and Finance (the "MEF")? Business entities should heed recent

notifications by the MEF regarding outstanding tax debts.

The MEF, armed

with jurisdiction over tax issues, has publicized a number of notifications to

encourage business entities to settle their outstanding tax debts; warning that

otherwise the MEF will take strict measures to collect the debts. Among hundreds

of companies, ranging from investment to trading entities, 215 companies have

been specifically directed by the MEF to clear their outstanding tax liabilities

by November 30, 2002. This notification is a procedure set out in the Taxation

Law which must be followed prior to the MEF undertaking any strict measures

against tax payers who have tried to pass muster.

The MEF has clearly

indicated that it will undertake strict measures against business entities who

neglect to settle their tax liabilities by the above deadline. Under the

Taxation Law, the strict measures include the following:

• Confiscation of taxpayer's properties to settle the tax debts and costs

  related to such confiscation and tax debt collection if taxpayer fails to pay

  the tax debt within 15 days after receiving the reminder letter of notification

  for tax collection;

• Freezing the bank account of the taxpayer by order of the MEF. Taxpayer will

  not be allowed to open a new account until all the tax debts are settled as

  confirmed by notification of the MEF. The bank will be responsible to the extent

  of the tax debts of their clients if it fails to follow the MEF's order;

• Stopping import-export operations of the taxpayers according to an order

  from the MEF to the Custom and Excises Department; and/or -

• Order to nullify permit and licenses by the MEF issuing a notification to

  other competent authorities to nullify relevant permits and license.

The aggrieved taxpayers have an avenue through which they might challenge the

MEF's decision on tax liabilities. Taxpayers can file a protest to the Tax

Department within 30 days after the day they received the notification of tax

collection. If they are not successful, in the absence of the tax court, the

normal court system may be utilized by the taxpayers to challenge the decision

of the MEF's decision. Note the downside in taking this approach is that

taxpayers will have to deposit at the National Treasury an amount equal to the

sum of the outstanding tax liabilities, additional taxes and interest on the

amount under dispute as assessed by the Tax Department. In addition, court

litigation is costly and time consuming.

- Suonty You, L-Martin Desautels, DFDL Cambodia