A Ministry of Finance directive issued recently states that large and medium-sized businesses must implement new international accounting and auditing standards by early 2005.
“From now until late 2004 is an education period,” Ngy Tayi, undersecretary of state at the Finance Ministry, said Monday.
“Implementing accounting standards will help [the] government to collect tax revenue,” Ngy Tayi said.
The government has had difficulty collecting tax revenue so far this year. Provisional budget implementation numbers from the Finance Ministry show that the government received just
54 percent of its budgeted revenue in the first eight months of this year.
In an effort to increase revenue to bridge a nearly $55 million budget deficit, Finance Minister Keat Chhon said recently that the government will confiscate property, freeze bank accounts, halt import-export operations and cancel business licenses if companies do not pay what they owe by Nov 20.
In April, the National Accounting Council adopted 15 accounting standards and 10 auditing standards agreed upon by the government and the World Bank and based on international standards. World Bank officials were not available for comment on Monday.
Though more than 40 international accounting standards exist, Ngy Tayi said the government decided to adopt only 15 because that number matched the scale of the economy.
“The government wants to choose all the standards worldwide, but the country lacks human resources, a large-scale economy and a stock exchange,” Ngy Tayi said.
“For the first step, we will try 15 standards,” he added.
Local business experts say that many large companies do not pay taxes. The new accounting standards, they say, will be easy to put in place because no standards currently exist.
“It’s a common practice for local companies to keep two or three sets of books,” said Casey Barnett, director of CamEd, a firm that trains accountants. “The new accounting standards will make it harder for businesses to hide things.”
The government, which severely lacks professional accountants, is training 70 students to become internationally certified accountants.
Since more than half typically fail the exam, the government expects to have about 30 professional accountants after the course ends in about three years.
Because the directive is aimed at larger businesses, small companies, most of which already do not pay official taxes, will continue to pay only unofficial taxes.
“Small companies mostly don’t bother paying taxes,” Barnett said.
“They make a small, informal payment to government officials, which is usually a fraction of the amount they owe to the government.”