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Tax on arable land good for govt and farmers

Tax on arable land good for govt and farmers

Dear Editor,

Hitherto, the government has been keeping its promise not to tax arable land – more to the point, rice fields. From one perspective, this is sensible because roughly 72 percent of Cambodians survive on subsistence farming. By not levying the tax, the government shows its empathy towards farmers who mostly live from hand to mouth.

However, regardless of any underlying political reasons, it is time to rethink the socioeconomic reward of taxation. Taxing arable land (estimated at about 3.7 million hectares) is probably a win-win solution for the government, farmers and the general public.

For at least five decades, Cambodia has relied on foreign assistance of one sort or another. Since early 1990s, foreign aid has constituted about half the government’s annual budget. At some point, such assistance will dry up.

Notwithstanding donor aid, taxes have always been a prime source of government income. Without earnings, the government cannot afford to raise salaries for its employees or invest in public services (ie, education, health, infrastructures).

So, taxation is crucial. By not taxing arable land, the government is not helping farmers – and arguably, may even be harming them. The laissez-faire approach in which the government neither imposes tax on rice fields nor provides good irrigation system would be better replaced with an interventionist approach, where tax is levied but effective irrigation systems and other services are provided.

Here, I propose two interlinked policies. On one front, tax should be imposed on large arable land holdings (say, 1.5 hectares and above). As poor farmers are likely to own smaller plots, such a tax would only affect wealthier ones.

On another front, with good irrigation systems in place (currently irrigated areas are estimated at 7 percent of arable land), farmers would be encouraged to cultivate more than one crop annually.

Any unused agricultural land would not only be taxed but also penalised. The idea is to give incentives to farmers to cultivate as much as possible. So, what are the advantages?

Potential benefits are multifaceted. The government can generate revenues from tax on arable land and associated taxes that can be reinvested in the agricultural sector. Farmers can better utilise their land to generate income locally. This would reduce the need for seasonal migration to larger cities or other areas (26.5 percent of Cambodians have experienced migration) or for selling their land. It would also contribute to poverty reduction and the creation of local jobs while preventing migration. Less migration generally means less victimisations and crimes.

Once farmers can stand on their own feet, they will be less dependent on the government’s ad hoc and unsystematic assistance. In addition, with increased agricultural production, the general public surely would benefit from more affordable agricultural produce.

Chenda Keo
Canberra

Send letters to: [email protected] or PO?Box 146, Phnom Penh, Cambodia. The Post reserves the right to edit letters to a shorter length.The views expressed above are solely the author’s and do not reflect any positions taken by The Phnom Penh Post.

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