The National Assembly on Wednesday passed a new gasoline sales tax that will add $.02 per dollar for kerosene and $.04 per dollar for diesel fuel starting sometime in the first half of 1999.
The money collected from the tax will be used to establish a fund that can be used to repair roads, Finance Minister Keat Chhon said.
The fund is being established in response to the concerns of international lending institutions and foreign donor countries preparing to help build roads in Cambodia, Keat Chhon maintained.
“If we have no such fund it will be difficult to mobilize funds from donors,” Keat Chhon said Wednesday, referring to common clauses in agreements with donors that require receiving nations to come up with a certain percentage of a project’s costs.
Cambodia’s donors are expected to meet in February to discuss the prospect of new loans for the country.
The Asian Development Bank has already pledged $40 million for Route 1 and the World Bank is expected to soon approve a $40 million loan package for Routes 3 and 6.
The new tax will take at least one or two months to implement, Keat Chhon said.
The tax and proposed road fund has been discussed for at least a year with donors and officials from the Ministry of Public Works, Keat Chhon said.
Opposition politicians from the Sam Rainsy Party hotly debated the tax in parliament on Monday, saying that the increase in costs at the gas pump would hurt consumers. Others argued that the government should do more to crack down on fiscal waste in the collection of logging revenues and at the Ministry of Defense before asking consumers to reach into their pockets.
The tax was passed by 68 parliamentarians out of 98 present.
Keat Chhon argued that because the price of oil dropped this year and is now slowly stabilizing, oil companies “can afford to compete.”
Petroleum giant Caltex declined comment on the new gas tax and officials at Shell and Sokimex could not be reached.
For consumers, this will be the second new tax on petrol in 1999.
On Friday, the value-added tax goes into effect and consumers will be paying more for everything from gas to restaurant meals to telephone calls.
The 10 percent VAT is a tax on the estimated market value added to a product or raw material at each stage of its manufacture or distribution.
The manufacturer or distributor can claim a credit for the tax it paid on the product, so the tax is borne by consumers.
It replaces an existing 4 percent turnover tax on which companies could not claim credit.
Some companies, such as Telstra and MobiTel, have already announced that people will pay 10 percent more for phone calls as of Friday. The petroleum company Shell, however, has announced it will swallow the tax and keep its gasoline prices the same.
(Additional reporting by Debra Boyce)