Tax collection may encounter speed bumps this year amidst the convergence of global crises, as signalled by the finance ministry’s downgrade – announced in late January – of Cambodia’s 2023 economic growth forecast from 6.6 per cent to 5.6 per cent, according to General Department of Taxation (GDT) chief Kong Vibol.
Vibol was speaking at a March 6 workshop on income tax obligations, completing annual income tax returns, investigations of tax related offences, and anti-money laundering.
The GDT said that it collected $3.45511 billion in revenues last year, exceeding the $2.81955 billion annual target by 22.54 per cent and marking a 24.20 per cent jump over the total that it had reported for 2021. The 2023 target has been increased by 26.68 per cent to $3.57170 billion, which is just 3.37 per cent more than the amount collected in 2022.
Annual GDT revenue targets are set by the Law on Financial Management for the corresponding year.
Vibol remarked that although Covid-19 management remains up-to-date and effective, the Russo-Ukrainian conflict, global geopolitical crises, and inflationary pressures, compounded by declining purchase orders from international buyers, have dampened Cambodia’s economic growth.
The ministry’s roughly one-percentage-point downgrade in nominal gross domestic product (GDP) growth is immense, and the impacts that it reflects could pose difficulties for tax collection, he stressed, adding that leaders of large companies have been bringing up some of the foreseeable risks to their business operations this year, at a number of meetings.
On the other hand, the Financial Action Task Force’s (FATF) removal of Cambodia from its “money laundering grey list” – officially known as “Jurisdictions Under Increased Monitoring” – and placement in the “white list” bodes well for efforts to attract more foreign investors, and will facilitate money transfers to and from the Kingdom, he opined.
Cambodia was relisted on the grey list in 2019 by the FATF – an intergovernmental body set up to develop and promote policies to combat international money laundering and the funding of terrorism – after it had previously been removed in 2015.
The Kingdom’s relisting was largely pinned on the influx of Chinese casino investments in Sihanoukville and a perceived lack of law enforcement resources dedicated to fighting money laundering and its associated crimes.
Hong Vanak, director of International Economics at the Royal Academy of Cambodia, commented to The Post on March 6 that tax revenues are important for the development of a country’s “hardware” and “software” aspects.
In general, as larger sums of taxes are collected, in a transparent manner, competition too becomes more transparent and national economic growth gains momentum, he stated.
“Tax revenues are the economic lifeblood of every country in the world. So, for a country to thrive, it is necessary to collect these revenues efficiently and in accordance with both fiscal and non-fiscal principles,” he said, adding that increases in taxes collected tend to mean more funds for the government to repay borrowers or to deal with any sudden crises.
Meanwhile, in January, the GDT reportedly collected $300.59 million in revenues – or about 8.42 per cent of the full-year target for 2023 – marking a 4.29 per cent increase year-on-year.
This was revealed in a GDT press release issued in conjunction with a February 16 meeting to review the department’s tax collection results for January and set the work direction. Vibol put the increase down to efficiency in tax collection as well as the deployment of digital systems to facilitate the process.
Major sources of revenue included income, salary and value-added taxes, respectively accounting for 20.73 per cent, 18.07 per cent and 8.57 per cent of the total, the release said, affirming that all three grew year-on-year.
“The GDT expects good results from income tax filings and payments for 2022 during the annual season, without any backsliding, supported by the E-Filing and ToI E-filing systems, which are solid, transparent and important mechanisms that strengthen cross-checking of tax declarations and payments,” Vibol said in the release.
He contended that the digital transformation of administrative processes, combined with reforms and supporting infrastructure, has helped ensure speed and efficiency in the GDT’s work, leading to the sustained growth in revenues across all types of taxes.
In a previous interview with The Post, Vibol stressed that the GDT will continue to make its reforms more sweeping, and stick to its modernisation plans to better manage the collection of an increasing amount of taxes, provide improved services, and encourage proper tax registration.
“We’ll keep pressing ahead with our reforms, build a more positive taxpaying culture among those who may have never known the law, and further reinforce the knowledge and capacities of officials,” he added.
Amid regional and global economic uncertainty, the GDT will focus on additional measures to support post-Covid-19 tourism recovery, prop up and rehabilitate businesses, and blunt general adverse effects on socio-economic conditions, according to Vibol.