Gov’t Plans to Increase Tax Collection, Borrowing to Pay For Budget

In order to finance its almost $2.4 billion national budget, the government hopes to increase revenue from tax collection by almost 15 percent and plans to borrow double the amount it did in 2010.

According to a copy of the draft budget obtained this week, authorities plan to collect about $1.54 billion in taxes across all sectors–including casinos, housing and land, and customs duty. This represents a 14.2 percent increase over 2010.

In addition, the government plans to seek up to 400 million SDR in loans from other nations and institutions, including the International Monetary Fund and Asian Development Bank. SDR–or Special Drawing Rights–are a unit of currency originally created by the IMF. The current exchange rate is $1.57 per SDR.

The country borrowed 200 million SDR to fund the 2010 budget, according to the draft. Officials said last week that the government would fund a rise in spending without relying more heavily on foreign aid.

Senior CPP lawmaker and Chairman of the National Assembly’s Finance, Banking and Audit Committee Cheam Yeap said the increase this year was so that the government had reserve funds to deal with emergencies like natural disasters or foreign invasions.

“It’s just for putting into the reserve budget of the government,” he said.

Mr Yeap said the government was confident of its ability to increase tax revenue.

“[Predicted tax revenue] has increased because from year to year the government had developed in all sectors such as the economic sector,” he said.

Koul Panha, executive director of the Committee for Free and Fair Elections in Cambodia, said that the government could only increase revenue from taxation by fighting corruption.

“It needs a commitment from the government to focus on anti-corruption,” he said.

He added that the budget could compel the government to become more serious in its fight against graft.

“This could put pressure on the government to reduce corruption to increase revenues,” he said.

The government hopes to improve domestic tax collection by 14 percent, from about $887.6 million in 2010 to approximately $1.01 billion for next year. A 10.2 percent increase is planned for tax on foreign trade revenue, from about $264.8 million last year to about $291 million for 2011.

The government also plans to increase the amount it collects from state property. It hopes to see a 17 percent rise in revenue from land concessions, 10.6 percent from forestry concessions, 8 percent from mineral concessions and 2 percent from fishery concessions.

SRP spokesman Yim Sovann said yesterday that Cambodia collects only around 11 or 12 percent of GDP from tax revenue. This compares with an average of around 16 percent in similar developing nations. Mr Sovann said he believed the figure could be ten percent higher if corruption were eliminated.

“We can see that the loss of about 10 percent of tax collection [revenue] is because of corruption,” he said.

Mr Sovann said the government had not provided sufficient information on its borrowing plans.

“In general, we need to know the plan for proposed loans to know where the budget will go. Secondly, they must be sure that government can afford to pay the debt or not,” he said.

(Additional reporting by Ian Williamson)


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