The government has offered local distributors of cigarettes and alcohol some slack by reducing the tax obligation on secondary distribution of their products.

A prakas issued late on Tuesday by the General Department of Taxation (GDT) revises the application of the public lighting tax (PLT), a 3 percent tax that is applied to the invoices of both imported and locally produced tobacco and alcohol products and levied at the time of each in-country sale. Under the revision, primary distributors of these products will continue to pay PLT on the full value of these products, while the tax base for calculating the PLT on secondary distribution will be reduced from 100 percent to 20 percent of the selling price exclusive of VAT and PLT.

The prakas applies to beer, wine and certain alcoholic spirits, as well as cigarettes and all types of electronic cigarettes – or e-cigarettes – which have been banned by the government since 2014.

Clint O’Connell, head of tax practice for DFDL Cambodia, explained that while importers and manufacturers will not see their tax obligations reduced, the prakas will provide a “little downstream tax relief” for distributors.

“The obvious benefit to the distributors is that the amount of tax that they were paying will decrease,” he said. “This saving will either be kept by the distributor or passed on to the end consumer. If the savings are passed onto the consumer it is good for producers as it may make their products more competitive and increase sales.”

He added that the Cambodia Chamber of Commerce has been lobbying the GDT to reduce the PLT applied to distributors since June, and the government response appears to have taken in private sector concerns.

Alan Yeo, vice president of Cambrew, which is half-owned by brewing giant Carlsberg and operates a brewery in Sihanoukville, said that as a manufacturer and primary distributor the reduction would have little effect on the company. However, he said supply chains could see some benefits in reducing the costs passed on to consumers.

“While we always pay the 3 percent public lighting tax, we are not clear on how secondary distributors invoice their sales,” he said. “However, with such a competitive beer market in the country, any changes that lower taxation will have large impacts across the market and benefit consumers.”