Only 200 of some 5,000 domestic NGOs have submitted required banking details to the Interior Ministry, its spokesman said on Monday, as the government steps up enforcement of tax requirements on organizations that may have racked up huge unpaid bills.
Uncertainty of the rules under the controversial Law on Associations and NGOs, or Lango, may be contributing to their reporting apprehensions.
A survey of more than 140 NGOs by the NGO consortium Cooperation Committee for Cambodia (CCC) last month found that the groups lacked clarity on how they should comply with the rules as well as how to submit payroll taxes, and wanted more guidance from a government that unevenly enforced them, according to Soeung Saroeun, the consortium’s executive director.
“Members of civil society do not yet fully understand it, and are not yet fully prepared,” he said. “The provision and implementation of the law is not consistent.”
In a speech last month, Interior Minister Sar Kheng said civil society was flouting Lango’s reporting requirements and ordered NGOs to submit bank account information by the end of next month or face legal action. And on Friday, Prime Minister Hun Sen asked several ministries to investigate whether NGOs were correctly submitting payroll tax. The Cambodia Daily, which is not an NGO, received a tax bill that evening claiming $6 million in unpaid taxes, which the newspaper’s new owner said she would respond to in due time.
Reached on Monday, Interior Ministry spokesman Khieu Sopheak said only 200 NGOs submitted their account information.
“The ministry has also issued letters to remind them to follow the law and now we have delayed collection until September for the NGOs to submit their account number to us,” he said.
Groups must meet Lango’s requirement for submitting financial reports by the end of February, he said.
Kim Sopheak, a spokesman for the Economy and Finance Ministry, said the government was still collecting information on NGOs’ compliance with payroll tax laws and declined to provide figures to reporters.
Bou Sophoan Phirum, partner and head of tax and accounting at BNG legal firm, said many NGOs were unaware they needed to follow their Lango-mandated registration at the Interior Ministry with a second registration with the Finance Ministry’s tax department.
“Some organizations protest that they are doing humanitarian work, so why also need to pay salary tax, but according to the tax law, they are not excluded from the tax obligation,” he said.
Mr. Sophoan Phirum said he had seen a rush in the last few months of NGO clients grappling with the new law and potential tax bills stretching decades, with settlements negotiated one-on-one with the government.
“Some might request to the ministry on their own to waive their tax since the year they had registered [as an NGO] till now in order to not receive fine,” he said. “Because there is no law specifically stating [requirements], they have to request it on a case-by-case basis.”
The tax department had become more active across the board, according to Mr. Sophoan Phirum, sending announcements and contacting NGOs to inform them of their legal obligations.
But Mr. Saroeun said the quick, CCC-sponsored survey in the wake of Mr. Kheng’s announcement showed groups across the country were overwhelmed by the sometimes vaguely-defined requirements of both Lango and the payroll tax.
Some NGOs weren’t sure what to include in their financial reports or to which branch of the ministries they should be submitted, he said, while donors were also unclear of their requirements under the law. Other NGOs were frustrated that they were required to pay salary tax without being clear on whether their employees would receive a state pension, or were unclear how to do so.
Additionally, some local officials were mistakenly demanding permission for all NGOs activities, citing Lango, he said.
Mr. Saroeun urged the government to delay next month’s deadline for bank account information and instead meet with civil society to bridge the information gap on their financial requirements.
Correction: This version of the story corrects the headline to delete reference to tax.
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