Cambodia’s underdeveloped tax system is starting to show signs of improvement with tax revenues entering government coffers at a markedly increased pace this year.
Hang Chuon Naron, secretary of state at the Ministry of Finance, said that the government’s general department of taxation had increased tax revenues by around 20 percent this year.
He also said that non-tax revenue payments had increased by around 30 percent and revenues through the general department of customs and excise had risen by 10 percent.
“Tax revenues have risen this year,” he said. “The ability of the government to collect taxes is improving.”
Mr Chuon Naron said that official figures on the amount of revenues the government had earned had yet to be finalized and would be published next year.
According to data at the Ministry of Finance, tax revenues amounted to 4,277 billion riel, or about $1.07 billion in 2009. And revenues in the first nine months of 2010 have already surpassed that amount by 13 percent rising to 4,841 billion riel, or $1.21 billion, between January and September.
But with more revenues at the government’s disposal, opposition members say the amount of government spending going toward priority areas in the economy is still not enough.
Only about 30 percent of the total budget goes toward priority areas such as agriculture, rural development, water resources, health and education, said opposition SRP spokesman Yim Sovann.
“This kind of allocation is not acceptable,” he said, adding that a large portion of the remaining funding goes to areas like defense as well as domestic and foreign affairs.
He added that there was still a long way to go in Cambodia where tax revenues amount to only 11 percent of GDP compared to 25 percent in Vietnam and Thailand, a phenomenon he put down to high levels of corruption.
The government’s budget for 2011 allocated $501 million to the social affairs sector out of a total budget of $2.4 billion.
Experts say the increase in tax revenues is down to a mixture of government enforcement on paying taxes and a desire from within the private sector to standardize their operations.
“Enforcement here has improved by reorganizing the General Department of Taxation,” said Edwin Vanderbruggen, managing director of the regional tax practice for the legal consultancy DFDL Mekong.
He said that some larger companies here are beginning to show signs of a desire to pay taxes in order to improve their corporate governance, an initiative in part driven by the possibility of listing on the forthcoming stock market.
“In a country such as Cambodia, where enforcement is still not as strong as in other countries, the fact tax payers volunteer to comply with the tax laws is very significant,” he said.
Despite an increase in tax revenues this year, Mr Vanderbruggen said that trade agreements between Asean and countries like South Korea and China would limit the ability to accumulate revenues through excise.