‘Sin’ Tax on Booze, Cigarettes to Take Affect

Starting next Wednesday, the government plans to levy a 3 percent tax on imported alcohol and cigarettes in its newest effort to fill national coffers.

The tax was passed late last year by the National Assembly after plans were scrapped for a 3 percent tax on electricity. But nothing more was heard about the tax for several months.

An announcement was made on state television Tuesday night that the alcohol and cigarette tax would take effect Sept 1.

Khor Hock said his company, EAC, which imports Marlboro cigarettes, received little other information about the tax.

“We have no clear direction yet,” he said. “We do not know what the implications will be. We are trying to get more details.”

Khor Hock said he did not yet know whether the tax would be passed on to consumers or absorbed by the company.

Government officials are hoping the new taxes will boost revenues significantly. A 10 percent Value Added Tax introduced earlier this year has brought $44.2 million in revenues in the first six months of 1999—exceeding expectations.

But importers and cigarette manufacturers contacted Wed­nes­day said the new tax may have the undesirable effect of increasing smuggling.

“It’s going to have a negative impact on the industry as well as the country,” said MA Mokad­dem, general manager of British American Tobacco.

As prices for goods in Cam­bodia rise, smuggling becomes more lucrative, he said.

Because BAT manufactures cigarettes in Cambodia, it will not be affected by the new tax. But Mokaddem said his business has been hurt by the 10 percent VAT, which taxes goods and services for 2,000 of the country’s largest companies.

“Already we are suffering. The whole cigarette business has shrunk,” he said. “The disposable income of consumers cannot keep up” with the taxes.

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