Cambodia continued to increase its tax collections in 2020, with revenues rising a modest 4 percent, on account of strong business activity in 2019, a trend that could falter in 2021 due to the COVID-19 pandemic last year.
Government officials and industry experts attributed the increase in revenue to good revenues and business activity in 2019. But, they expect revenues to be affected this year by the economic slowdown experienced in 2020, with estimates showing that the gross domestic product could contract by four percent because of the COVID-19 pandemic.
The Cambodian Tax Department released a report on January 11 that it had collected $2.88 billion in 2020, $104 million or 3.7 percent more than 2019. Tax collections in December 2020 itself were $240 million, a significant increase over December 2019.
The government attributed this increase to better tax collection mechanisms, such as an online tax filing and collection system.
“Even though the global economy has remained uncertain and Cambodia’s economy has been hard hit by the COVID-19 pandemic, the [tax] results was due to strong commitment from the government,” the report said.
Meas Soksensan, a spokesperson for the Ministry of Economy and Finance, said investors and businesses enjoyed good revenues and profits in 2019, which reflected positively in tax revenues for last year.
“This result comes from the government’s timely measure to provide an incentive for investors during the COVID-19, the investors trust the environment investment in Cambodia so all investment and business activity is still more active as normal,” he said.
The government can expect a reduction in revenues after taking some measures to provide some relief to businesses during the pandemic, which has affected the global economy. These measures include tax breaks for tourism and tourism-related companies, which have faced the worst impact of the slowdown.
David Van, a senior associate for public private partnership at Platform Impact, said the General Department of Taxation (GDT) had been efficient in collecting taxes over the last few years, enabling the government to grant better pay to civil servants and meet other state expenditures.
“[The] online process launched by GDT is also a very positive step towards allowing more transparency and avoid human interaction to cut rent-seeking attitude,” he said.
Van said it was uncertain if 2021 tax collections would remain as good because 2020 fiscal year operations had been impacted by the pandemic.
The GDT had proposed a 20 percent capital gains tax starting this year, but pushed back its implementation to next year after investors raised their concerns.
San Chey, executive director of the Affiliated Network for Social Accountability, said people need to closely follow how the government utilizes the increased revenue and monitor if projects are implemented as planned.
“They can evaluate the efficiency of the state’s expenditure, for example, how many roads and other infrastructure are built and the quality of those roads,” he said.
Im Norin, director of programs at Transparency International Cambodia, said that while certain tax revenues may fall this year, other revenues streams like value added tax, income tax, and tax on logistic services would remain strong.
“Value added tax is the current most important source of tax revenues in Cambodia. The increase is also attributed to the reform measures including strengthening and management of tax registration and collection,” said Norin