Cambodia’s small- and medium-size enterprises should formalise their accounts and register with the Taxation Department to avoid the risk of unpredictable tax collection in the future, industry insiders said at a tax seminar in Phnom Penh yesterday.

Clint O’Connell, a partner at local tax advisory from VDB Loi, estimates that up to 80 per cent of businesses in Cambodia are currently not registered with the General Department of Taxation.

Larger businesses are more likely to registered, O’Connell said, but the Tax Department was becoming more wary of the growth of small firms.

“Sometimes it’s just a matter of how visible you are,” O’Connell said, speaking to representatives from about 100 local companies yesterday. “If your business is successful and you are quite visible, it is more likely the tax department will come along and require you to register. So sometimes you can be a victim of your own success. ”

According to O’Connell, at any moment the Department of Taxation can impose tax on any company that is not registered and in a worst-case scenario the GDT can apply a retrospective start date with interest and penalties.

Encouraging businesses to formally register with the GDT and to seek a clear understanding of their obligations, O’Connell advised SMEs to steer clear of making unofficial payments that facilitate corruption and complicate the taxation process.

Corruption watchdog, Transparency International also urged SMEs yesterday to understand the risks associated with corruption and to comply with their tax obligations.

“Income from taxation is very crucial for any country to run the government, build capacity of institutions, [as well as] develop the economy and infrastructures,” said Preap Kol, executive director of Transparency International Cambodia said after the event.

“Corruption can take away a substantial amount of money from taxation through invasion arrangement of facilitation by corrupt officials colluded with corrupt business owners.”

Seminar attendee Dah Lee, CEO of Biggercomms, said that tax enforcement was on the rise and it was important that businesses were aware of the changing environment.

“There are a lot of laws being introduced at the moment and a lot of changes going on that the ministries are [enforcing].

“Everyone is keen to find out what applies to them or not, because previously it’s been pretty voluntary. So now all of a sudden there are laws that apply to most sectors.”