On September 21, EuroCham Cambodia held its “Tax Forum 2016” with well over 400 attendees, reflecting the avid interest in the dynamically changing tax system in Cambodia and the opportunity for business professionals to resolve looming tax questions.
His Excellency Kong Vibol, Director General of the General Department of Taxation (GDT), gave the keynote presentation and further furnished 15 senior tax officials from the GDT, who either participated in panel discussions or responded to questions from conference members.
Legal and tax experts delivered presentations on pertinent trending tax topics and engaged in dialogue with the audience through panel discussions. The event was an enormous success with incredibly positive feedback. There were several key conclusions reached, which emerged throughout the conference.
The base of taxpayers in Cambodia is expanding as a result of the abolishment of the estimated regime, greater inclusion of small taxpayers, and assertive policing by the GDT, targeting companies still reluctant to register as taxpayers. Tax revenue rose to $1.3 billion in 2015, up 22 percent from 2014, and have increased to US$829 million in the first half of 2016, a surge of 18 percent, compared to a GDT of 7 percent. His Excellency noted tax revenues as a percentage of GDT are a paltry 20 percent, compared to an average of 30 to 40 percent in most countries.
Although the GDT has had success in broadening the taxpayer base, there is still a long way to go in capturing those businesses still evading registering as a taxpayer. In a recent survey, the GDT discovered that as much as 50 percent of businesses obliged to register in the Chamkarmon district had failed to do so.
The Ministry of Economy and Finance, through Notification No. 039, recently announced visits to businesses to collect data and inspect constitutive documents. The GDT intends to continue its door to door examinations of businesses to further capture those outlying offenders. This is a very resolute initiative by the GDT, with tools such as digital mapping. So, those remaining non-compliant offenders should register forthwith.
The increased scale of audits has significantly contributed to the GDT’s coffers. The number of audits has risen by more than 300 percent since 2014 and the GDT is on track to execute close to 3,000 audits in 2016. Existing taxpayers are feeling the pinch as a result of heightened oversight. It is not unusual for a company to be confronted with two audits at one time.
Audience members raised concern over GDT Instruction No. 1127, which reminded taxpayers of existing invoicing requirements and stipulated the use of the Khmer language, use of quality ink and paper, and maintaining records in good condition for 10 years. Despite the grumbling, the GDT remained firm, save the acceptance of technical terms permitted in English only.
There were, also, several positive developments. The GDT has remodelled its tax branches to be more user-friendly and have trained its staff to be more customer-oriented, recognising in the past tax department personnel may have been “nasty” and “unfriendly” at times. His Excellency mentioned that tax payment options will be extended, likely to include ANZ Royal and potentially Wing. Tax filing online will shortly become a reality, relieving taxpayers of the requirement to physically visit tax branches to lodge their tax forms.
The most monumental announcement was by His Excellency Kong Vibol who mentioned that the GDT is considering the elimination of the 1 percent minimum tax under certain circumstances where a taxpayer can provide an audited report and demonstrate full transparency. It is believed that the overwhelming majority of taxpayers do not pay profit tax, so the minimum tax has been a safety net. His Excellency made it clear that the GDT is a partner in the company of the taxpayer, and stated, “I want my 20 percent”, referring to the 20 percent annual tax on profit.
Finally, His Excellency disclosed that taxes will not increase in the next two years.
Anthony Galliano is the chairman of the Eurocham Tax Committee and CEO of Cambodian Investment Management