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.