Teng Bunma Raps 10% VAT

The introduction of the Value Added Tax is causing foreign investors to hesitate before putting their money in Cambodia, according to Teng Bunma and other leading local businessmen.

Teng Bunma, president of the Phnom Penh Chamber of Commerce and director of the Thai Boon Roong group of companies, said last week that a VAT at 10 percent was too high and was discouraging business.

“The government should explain clearly to business people why VAT needs to be 10 percent,” he said at Olympic Market.

The 10 percent VAT was introduced by the Finance Ministry on Jan 1 and is collected on gasoline, phone calls and other consumer products and services. It is a tax on the estimated value added to a product or raw material at each stage of its manufacture. The new VAT initiative replaced the 4 percent turnover tax.

Chinese businessmen who are considering investing $200 million in Cambodia are dragging their feet because they are wondering why taxation is so high, Teng Bunma said.

The projects, if the businessmen decide to go ahead, would result in two factories, one making motorcycles for the Chhun Laing company and the other manufacturing trucks for the Transporting Truck company. According to Teng Bunma, representatives of the two companies will be arriving this week to assess the economic situation and look for business partners.

Kong Triv, the vice president of the Chamber of Commerce, said that a 10 percent VAT would damage Cambodia in the long term. He added that investors may put up with a 10 percent VAT initially but that eventually the high tax would drive away investors and jobs.

Teng Bunma suggested that the Cambodian government should look to Thailand, which is a more developed nation and sets the VAT at only 7 percent. “Three percent for the VAT is all right for Cambodia because of the current economic situation,” he said. “Let investors make some money on their investments first.”

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