Owners of grandfathered right-hand drive vehicles brought their trucks to get registered in order to pay taxes in July. GDCE
Tax collection on imported vehicles which use various illegal number plates is an important source of income, and contributes almost half of the total revenue collected by the General Department of Customs and Excise (GDCE).
In order to increase revenue gathering for the national budget, Prime Minister Hun Sen in August last year ordered strict enforcement on private vehicles with illegal plates, and untaxed right-hand drive vehicles.
Since the crackdown began, the GDCE has collected nearly $100 million in taxes. It has also introduced strict measures at border crossings and waterways to reduce tax evasion.
The introduction of these moves gained widespread support from civil society organisations, vehicle owners, vehicle importers as well as consumers. They all agreed it would create a competitive transparent vehicle market and increase state revenue.
GDCE director-general Kun Nhim said tax collection on existing untaxed vehicles in the country had made a significant contribution to the revenue raised by the department.
“This was the main source of revenue collected by customs. The taxes on these vehicles made up about 43 per cent of the total we gathered this year,” he said.
He said that because vehicle sales are the main source of income for customs, it was important to eliminate tax evaders. Vehicles were smuggled in through various means, he said, often hidden in containers and shipped across the Cambodian-Thai border.
“We will enforce more stringent measures to prevent vehicles being smuggled into the country. Untaxed vehicles not only reduce the government’s revenue, but unfairly affect the vehicle market,” he said.
“Our goal is to ensure a fair market. We want to ensure that government revenue does not suffer, and we want the automotive sector to be a competitive market,” he added.
Nhim admitted that it was unlikely that all tax evasion could be eliminated, but he aimed to reduce it to the minimal acceptable level.
“We want an acceptable business environment. And after all, we are all obligated to pay taxes together,” he said.
Ngorn Sang, the chief executive officer of RMA, a major luxury car importer, expressed his support for the move, saying it would be a part of ensuring a transparent and sustainable industry.
“The enforcement of tax law must be strengthened to eliminate the smugglers who convert right-hand drive vehicles. This would mean increased tax collection – and the business will be more profitable when car prices in the Kingdom are closer to factory prices,” he said.
“For example, if we are the exclusive importer of a brand, then others do not have the right to bring that brand in. An individual can bring a vehicle in of course, but he is no right to sell it. The tax he pays will be less that our bill, because we pay according to the factory price. This means his car will be cheaper and will sell faster,” he explained.
The executive director of Transparency International Cambodia, Pech Pisey said in the past that tax collection was important for the effective running of any government.
“I think it’s important to pay close attention to transparency and equality of compliance with tax obligations. This means that we should ensure an environment of equal tax compliance for both large and small companies, regular people and powerful people,” he added.
While applauding the government for increasing its revenue, he warned that it needed to improve public confidence in the management of the state budget. A competitive car market was important to attract foreign investment, he added.
“There are many international automotive companies doing business in the Kingdom now, such as Mercedes, BMW, and Volkswagen. Because these companies are international brands, they comply fully with the tax laws of Cambodia. Some local companies import the same brands, but evade taxes, meaning the market is not a level playing field.
“By guaranteeing tax compliance for all, we will have fair competition. The beneficiaries of that will be the public, as companies will be competing directly with each other,” he added.
The owner of the D&D car yard in Phnom Penh said that the government’s move was an excellent one.
He added that the move helped ensure transparency for legitimate businesses like his own, making competition more equal.
“It will help market prices to be clearer. In the past, the same model might be a legitimately imported model, untaxed, or even a cheaply converted right-hand drive vehicle. The latter two would certainly be cheaper, which may confuse consumers. That’s why legitimate importers struggle to compete,” he said.
He said it would also reduce the number of accidents on the roads, as license plates would make it easy to identify dangerous drivers. He was also concerned about some right-hand drive conversions, saying they were often poor quality conversions, done as cheaply as possible.
“Eliminating the illegal imports will attract investors who will import new vehicles to Cambodia. It will also give people the chance to use new, modern cars,” he said.
Phnom Penh resident So Thyda supported the move, saying that she was sure there were too many false police or state number plates.
“This must have caused a serious loss of state revenue. I hope that the law will be enforced equally, without exemptions for powerful people,” she said.
