The import tax on new vehicles will be lowered from 230 percent to 50 percent on Jan 1, Prime Minister Hun Sen said Monday at the opening of a water factory in Phnom Penh.
The main reason for cutting the tax, the premier said, is that the government has not collected much revenue from the high tax rate. If the tax is lowered, he said, more people might actually pay it.
“A lower tax paid by many people is better than a higher tax paid by a few,” Hun Sen said.
Generating revenue has been notoriously difficult for the government. A recent joint report by the World Bank and the Asian Development Bank found that Cambodia’s tax revenues are among the lowest in the world.
Lowering the new vehicle tariff, a move that officials hope will also reduce auto smuggling, is another in a series of recent moves by the government to collect money. Last week, the Finance Ministry released the names of 32 companies that owe more than $8.3 million in taxes and forbade them from participating in any public bidding until their debts are paid.
Ngy Tayi, undersecretary of state at the Finance Ministry, agreed with Hun Sen that luxury car drivers don’t pay taxes.
“We receive zero tax from them,” he said. “They are untouchable. If you see a modern car with RCAF or police license plates, they pay zero tax.”
The Finance Ministry raised the cost of importing used cars in October. The move then was not to generate more revenue, but to prevent the country from becoming a dumping ground for cheap used cars.
Opposition lawmaker Son Chhay agreed that the decision to lower the new vehicle tariff was “correct policy,” but said the decisions to raise or lower taxes should be made by the National Assembly.
“The prime minister can order karaoke and clubs to close,” he said, “but he is not supposed to decide tax policy.”