Gov’t Gas Rations Down 10 Percent Percent

Prime Minister Hun Sen on Thurs­day announced that the government will reduce the gasoline ra­tions of its ministries by 10 percent in order to conserve fuel.

The announcement came as Fi­nance Minister Keat Chhon de­fended the government’s fuel tax policy at the National Assembly in the face of an opposition party de­mand for tax-free gasoline.

“I would like to announce that all government offices have been ordered to deduct 10 percent from their gasoline rations in order to use it to power water-pumping ma­chines for farmers,” Hun Sen said at a Svay Rieng province tree planting ceremony.

He blamed current pump prices

—around $0.86 per liter in Phnom Penh—on international oil prices that are hovering near $70 a barrel.

“Even the US can’t stop [the in­crease], France can’t stop it, Ja­pan can’t stop it, they all buy at the same price on the New York market,” Hun Sen said.

“The best solution is to reduce traveling. In Thai­land they have [been ordered to] close gas stations at 10 pm.”

At the National Assembly, Keat Chhon said that by taxing petroleum at a fixed amount per ton, the go­vernment has in effect been subsidizing gasoline since the beginning of 2005.

“We have been subsidizing quietly,” he said. “In August…the total subsidy was $6.3 million.”

Keat Chhon said that while international oil prices are now up to $650 per ton, the government has continued to charge the $309 tax per ton it was charging in January when oil cost $330 per ton.

“While the price of crude oil has increased 50 percent, the sale price at [Cambodia’s] gas stations has increased only 18 percent,” he said.

Keat Chhon said that in 2004, Cambodia, which imports all of its fuel, imported 632,000 tons of pe­troleum on which the government earned $65 million.

This year, the country has im­port­ed 300,000 tons from January through August.

“If we had not collected the petroleum tax, we would have lost the $65 million, which equals 30 percent of total customs revenues and 2 percent of the GDP,” he said.

Keat Chhon also said that given the sharp 50-percent rise in international oil prices, the GDP may not grow 6.3 percent as the government had projected last month.

“The government understands when the price of crude oil increases between 15 to 20 percent, it will lower GDP growth by 1 percent per year,” he said.

Sam Rainsy Party lawmaker Son Chhay, who questioned Keat Ch­hon at the Assembly, said the government should actually lower the gas tax to counteract the effects of inflation and to combat smuggling.

He said he estimates that the government is able to collect taxes on only 20 percent of fuel in Cam­bodia because of smuggling, and that government revenues would actually increase if the tax rate was lowered.

“And if the price of oil per barrel goes up over $70, then the government should drop the tax altogether,” Son Chhay said.

He added that for nine years, the government had taxed fuel only $0.07 per liter, and then in 2003 had raised taxes to $0.23.

The current tax, using the minister’s per ton figure, equals $0.26, or 1,096 riel, per liter.

Kang Chandararot, executive director of the Cambodia Institute of Development Study, said Thurs­day that the decision to keep the pe­troleum tax fixed was a good one.

However, the government should decrease taxes on other common items to counteract inflation caused by oil prices, while in­creasing revenues from other sources, he said.

“The government should consider increasing taxes on imported Land Cruisers and villas,” Kang Chan­dararot said.

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