Increase in Customs Taxes Raises Retail Prices in Cambodia

Customs officers along Cambodia’s border have been instructed to increase their efforts to properly inspect and tax products coming into the country, which has increased the cost of imports and led to a rise in retail prices for a host of goods, government officials, businessmen and economists said.

Bou Bunnara, chief of the public relations unit at the General Department of Customs and Excise, said Monday that since early November, the government has been working to enforce customs inspection and taxation in order to cut down on the smuggling of goods into the country, in a bid to increase state revenue.

“We began implementation in early November of an operational plan in order to quickly strengthen the effectiveness of our work,” Mr. Bunnara said, referring to efforts to properly check and tax products coming into the country.

“We have prioritized the strengthening of revenue collection [at the border] because smuggling was increasing and we were losing state revenue,” Mr. Bunnara said.

Pen Siman, director-general of the General Department of Customs and Excise, issued a letter to customs officers on November 14 laying out guidelines for officers to do their jobs properly, and to strengthen their “moral commitment in customs inspection.”

“Customs officials must complete their obligation with loyal morality in accordance with regulations without discriminating in favor of any group or friend or relative,” Mr. Siman’s letter says.

Chhi Yun, owner of the MTC Import & Export Co. Ltd., said the newly-enforced taxation was costing his company both time and money, with cargo moving more slowly across the border at a higher cost to importers.

“We have a problem with small-scale imports because after the government took measures to be more strict with imports and exports, they have to check 100 percent of our cargo, so we lose time, and we also lose 15 percent of revenue,” he said.

Mr. Yun, who imports products mainly through the Koh Kong checkpoint along the Thai border, said that since the government ordered customs to better police goods, he has abandoned less profitable imports from neighboring countries to focus on high-end products coming from Europe.

Representatives of the garment and tourism sectors also said that the government’s new focus on customs inspection and taxation would impact their bottom line.

Ken Loo, secretary-general of the Garment Manufacturers Association of Cambodia, said that while the price of inputs into the garment sector would not be significantly affected, factory owners would still be indirectly affected by higher living costs for workers.

“If prices go up…this will of course result in upward pressure on wages, that will affect us,” he said.

Ho Vandy, co-chair of the Government-Private Sector Working Group on Tourism, said that the tourism sector would “definitely” be affected by the increase in commodities prices.

“Through this implementation [of customs policies], it will affect the price of [tourist] packages and the price of staying [in Cambodia]. This is 100 percent sure,” he said, adding that with intense regional competition for tourists, any increase in the cost of staying in the country is “not a good thing for tourism right now.”

But while the government’s implementation of customs inspection and taxation laws may be a drag on businesses in the short term, Kang Chandararot, president of the Cambodian Institute for Development Study, said that the rise in retail prices is likely a temporary reaction by the market that can be corrected with a government policy to promote domestically produced goods.

“I think that this [price increase] is a short term effect. When the market starts to adjust to new prices, I hope that there is a substitution effect in about a half year,” Mr. Chandararot said, adding that entrepreneurs in Cambodia should be encouraged to invest in the production of goods inside the country to compete with more expensive imported products.

“I think key commodities products such as rice and other agriculture products can adjust, if the government tries to promote investment in Cambodia to attract not only FDI [foreign direct investment] but also domestic investment,” he said.

“If something like that doesn’t happen, the price increase could create inflation this year,” he said.

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