Cambodia collected $265 million more in tax revenue so far this year than it did in the same period last year, which experts attributed to improvements to the country’s tax collection system.
The Finance Ministry’s general department of taxation collected nearly $1.2 billion in tax revenue during the first six months of the year, raising 32 percent more than in the first six months of last year, according to a statement from the agency on Tuesday. Revenues from almost all types of tax increased for the six-month period, with the biggest increases seen in the amount of value-added tax (VAT) collected, at 45.1 percent, and income tax, at 32 percent, according to the release.
Van Putipol, deputy secretary-general of the tax department, said the increase was due to ongoing efforts to educate the public to pay tax on time, as well as understand that taxation is a legal requirement. Mr. Putipol did not elaborate before hanging up on a reporter. Cambodia collected the same amount of tax revenue—about $1.2 billion—by the end of the third quarter last year.
Chris McCarthy, CEO of market research company MangoTango Asia, said more businesses had now registered with the Commerce Ministry, allowing the government to collect from more companies. But individual businesses were also increasing their taxable revenues amid the Cambodian economy’s growth.
“My company already paid more tax this year compared to last year, even though the rate is the same, because we have more business,” he said.
At the end of his visit to Cambodia on Tuesday, the International Monetary Fund’s deputy division chief Jarkko Turunen commended Cambodia’s increase in tax revenue last year to 15 percent of its GDP, but he said in a statement that the country must improve its tax administration and policies to continue to operate a sustainable economy.
Anthony Galliano, CEO of Cambodian Investment Management, also acknowledged that the number of people paying taxes in Cambodia had risen, for which he credited an overhaul of the tax department’s systems last year, which included registering more taxpayers, cutting excessive taxes on low-earning workers and conducting more audits. However, the country still has some untapped revenue sources in some small and medium-sized enterprises (SMEs), which have managed to escape business registration and the accompanying taxes, Mr. Galliano said.
“Approximately 30 to 40 percent of businesses, mostly SMEs, have still evaded the tax system, and capturing those into the tax system would vastly increase tax collection,” he said. Mr. Galliano also suggested that there could be a lack of knowledge or skewed incentives among tax department officials and advisers. Many of his clients reported prolonged audits as a result, he said.
“Auditors, being partially commissioned based, are reluctant to acquiesce in audits, even when the taxpayer is essentially clean,” he said.
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