The government has raised the tax-free bracket from 1.2 million riel (about $300) to 1.3 million (about $320) in a move to ensure civil servants due for raises this year are not subjected to income tax.
A sub-decree signed by Prime Minister Hun Sen earlier this month said all employees would have no obligation to pay tax if their salaries are below $320.
Last year, only those making under $300 were exempt from income tax.
The sub-decree also laid out all other tax brackets as follows – those earning $320 to $500 would be taxed at a rate of five per cent, $500-$2,000 (10 per cent), $2,000-$3,000 (15 per cent), and $3,000 and above at 20 per cent.
Ministry of Economy and Finance spokesman Meas Soksensan told The Post on Tuesday that the tax rate was revised by the government and the ministry in order to improve the living standards of citizens and civil servants.
He said many civil servants are due for small bumps in their salaries this year and it would not be fair to expose them to income tax.
The move, he said, was also agreed upon because the government surpassed its expectations in tax collection last year.
The government, therefore, decided civil servants with low salaries should not be subject to income tax, he said.
“This tax rate revision helps civil servants very much. If the government had raised their salaries and not revised the tax bracket, well then the raises would have been meaningless.
“For this reason, we revised the taxable stages by raising it a little to exempt civil servants from taxation,” he said.
Ministry of Civil Service spokesman Youk Bunna told The Post that all civil servants would receive pay raises this year.
He said that teachers will also see their salaries raised and will be able to keep the money now that the tax brackets have been adjusted.
“Overall, when the taxable rate is increased, the benefits will go to our officials. The education sector comprises of primary school teachers and lower-level teachers who earn salaries below the minimum,” he said.
Affiliated Network for Social Accountability executive director San Chey said many citizens will be exempt from tax because it is not only civil servants making meagre incomes.
“When we check the salaries that are subject to tax, it shows that many citizens are already below the taxable bracket. The new tax brackets are not likely to excite citizens,” he said.