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Tractor tax abolished, but farmers still stuck in a rut

A tractor is advertised for sale on Koh Pich in 2013.
A tractor is advertised for sale on Koh Pich in 2013. Pha Lina

Tractor tax abolished, but farmers still stuck in a rut

Prime Minister Hun Sen’s announcement on Facebook yesterday that the annual tax on vehicles used by limited-income families, including tractors, would be abolished was met with indifference by small-scale farmers, who said high interest rates on loan were a concern, not the negligible tax assessed on farm vehicles.

Dem Sreylim, deputy director of Chamroeun Phal Raingkesey agricultural cooperative in Battambang province, said small-scale farmers would not benefit from the removal of the tax, as very few can afford $30,000 tractors in the first place.

“We have 288 members in our cooperative and only one tractor that we rent to farmers,” she said, adding that most farmers use a two-wheeled walking tractor for regular chores.

Sreylim said the real burden on small-scale farmers was debt, as most of the farmers had borrowed heavily from microfinance lenders to purchase these single-axle machines, which cost $500 to $1,000. Moreover, the cooperative’s farmers were unable to make the high monthly interest payments as they were struggling to sell their rice paddy to the market.

“The crisis we’re facing now is that we have a lot of paddy rice, but we have no market,” she said.

“Since harvesting a few weeks ago, we have around 500 tonnes of paddy rice in stock and nobody wants to buy it, even at just 800 riel per kilo. If we can’t sell our rice, how can we make our loan payments?

“Even if the tax is cancelled, it would not help farmers much,” she continued.

“If government can help us find a market for paddy rice, that would help to us a lot.”

Hun Sen announced on his official Facebook page yesterday that the 2016 national budget, which was approved by the National Assembly, would dissolve tax collection for certain vehicles such as motorcycles, tuk-tuks and tractors to “improve the lives of citizens”.

Song Saran, CEO of Amru Rice, one of the country’s largest rice exporters, said the removal of the annual vehicle tax is more a benefit for large companies importing tractors than small-scale farmers unable to afford them.

“If the government wants to promote the livelihood of its citizens, it should consider reducing interest rates for farmers rather than cancelling this tax,” he said.

He added that 80 per cent of farmers rent a tractor to cultivate and harvest their fields, paying from $40-$100 per hectare.

They also require cash or instalment plans to purchase walking tractors for their fields, and the interest rates that microfinance firms charge cuts deep into their meagre incomes.

Independent economist Srey Chanthy agreed, stating that “the cost of the vehicle tax was not a problem for farmers or SMEs.”

Instead, he recommended that the government take direct action to help reduce farmers’ production costs and rise up the value chain.

He said affordable access to finance was critical, as farmers and SMEs require capital, yet also pay high interest rates on their loans.

“The government should consider lowering the interest rates on loans and reducing production costs, which are the main steps toward improving the livelihood of farmers,” he said.

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