Heavy trucks on a street in Phnom Penh, Cambodia. Photo by Phalinn Ool, taken on June 15 2015. Licensed under CC BY-NC-ND 2.0
The Cambodian government’s 2014–18 Revenue Mobilization Strategy aimed to enhance revenue administration and strongly increase the collection of taxes and other revenue. The strategy has been very successful.
The General Department of Taxation (GDT) reported tax revenues of US$900 million in 2013, $1.06 billion in 2014, (an increase of 17.7%)1 $1.3 billion in 2015 (an increase of 22%)2 and $1.49 billion in 2016 (a 15% increase).3 This shows that taxation is making up a significant part of the government’s national revenues and budget.4
Tax income has continued to grow quickly. In the first four months of 2019, the government collected US$1.15 billion in taxes – an increase of 26 percent over the same period in 2018.5 In the month of April 2019, $315 million was raised. The sum collected in the first four months is just over half of the total amount expected to be collected in 2019.
Cambodia is one of the best performing countries in the region in terms of improving its tax take. The kingdom was one of just seven economies in the Asia-Pacific region to show consistent year-on-year growth in overall tax revenue collections (% of GDP) in the 5 years up to 2015.6 The World Bank reported that during 2013–17, tax revenue rose by more than 4 percentage points of GDP, reaching 16% of GDP in 2017. That puts it in second place only to Vietnam.7
In September 2017, Cambodia joined the Global Forum on Transparency and Exchange of Information for Tax purposes.
Indirect taxes including value–added tax (VAT, a sales tax) form 60% of the total tax take. Indirect taxes reached an estimated 9.6% of GDP in 2017.8 By comparison, direct tax accounted for an estimated 4.2% of GDP in 2017.9 Cambodia’s direct tax revenue as a part of its total domestic revenue remains relatively small compared to other Southeast Asian states.
There was a major revision of tax law in 2016, with the amendment of Article 4 of the Law of Taxation.10 This ended the Simplified and Estimated Tax Regime, where taxpayers typically paid an agreed amount each month. Taxpayers must now pay tax based on their profit or size, and pay VAT (value added tax, a sales tax) based on their sales. Taxpayers were divided into categories:
- Small taxpayers – sole proprietorships with annual turnover $62,500–$175,000
- Medium Taxpayers – enterprises with annual turnover $175,000–$500,000
- Large taxpayers – enterprises with annual turnover over $500,000
- Registered Qualified Investment Projects.
For small taxpayers there are tax bands for tax on profit. Medium and large taxpayers usually pay a flat 20 percent profit tax.
In 2015, nearly all small businesses, a potential source of tax revenues, were reportedly unregistered.11 Some companies have been reported by the ministry to bear outstanding tax liabilities too, and delay their payment, leading to deficiency in tax revenues and the state’s national budget.12
In October 2017 a change to the personal tax rate for low-income workers was announced. Workers earning less than $300 each month will no longer be taxed on their earnings.13 From the start of 2018, the lowest tax rate of five percent will apply to those earning $300–375. The other rates remain at 10 percent for employees earning $375–2,125, 15 percent on $2,125–3,125, and a 20 percent rate for employees above that amount each month.
In addition, the government may boost tax revenue for the administration’s budget by making tax payments easier and adopting additional regulations. Recently, grants of licenses to Acleda Bank and Canadia Bank to collect taxes have been contributing to a continuous growth of tax revenues year on year.14
During a review of the 2013 National Budget, the Ministry of Economy and Finance also acknowledged that a lack of tax regulations in the natural resources, casino15 and telecommunication sectors is a major challenge for the ministry’s efforts in collecting more taxes from these industries.16
The Council of Ministers, the executive, may introduce a draft law on national budgets while the National Assembly gives approval on establishment, amendment and abolishment of any tax.17
Although the Law on Taxation defines ranks of profits and salaries that are subjected of taxation, the same can be done by budget laws by making amendments to the former. For example, the 2015 National Budget prescribes ranks of salaries that are subjected of taxation by amending article 47 of Law on Taxation in 1997.18
For more information and useful documents, the following links might be of interest:
- Taxes in brief
- Rights and duties of tax bearers
- Official documents for taxation in use
- FAQs on taxation
- Laws and regulations on taxation
- Organization and functioning of General Department of Taxation
Related to taxation
Last updated 31 May 2019
References
- 1. Cheng Sokhorng. “Tax collections reflect increased payment options.” The Phnom Penh Post, 8 October 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/tax-collections-reflect-increased-payment-options
- 2. Kang Sothear 2016, ‘Government Tax Revenue Collection Grows Nearly 22% in 2015’, The Cambodia Daily, 13 January 2016. https://www.cambodiadaily.com/news/government-tax-revenue-collection-grows-nearly-22-in-2015-105200/ Accessed 31 January 2016.
- 3. Hor Kimsay 2017. “Sleeker tax system nets more revenue”, The Phnom Penh Post, 16 January 2017.
- 4. In November 2014, the National Assembly of Cambodia approved the US$ 3.8 billion budget for 2015, meaning tax revenues alone are making up more than 30% of total spending by the government. Kuch Naren. “CPP lawmakers push through $3.8 billion national budget.” The Cambodia Daily, 29 November 2014. Accessed 20 October 2015, https://www.cambodiadaily.com/news/cpp-lawmakers-push-through-3-8-billion-national-budget-73314/
- 5. Ministry of Information 2019. Cambodia makes $1.15 billion from tax collection in first four months. May 10 2019. https://www.information.gov.kh/detail/297480 Accessed 30 May 2019.
- 6. Asia Development Bank July 2018. A Comparative Analysis of Tax Administration in Asia and the Pacific 2018 Edition https://www.adb.org/sites/default/files/publication/441166/tax-administration-asia-pacific-2018.pdf Accessed 28 September 2018.
- 7. World Bank April 2018. Cambodia Economic Update – Recent Economic Developments and Outlook. https://openknowledge.worldbank.org/handle/10986/29811?show=full Accessed 29 May 2018.
- 8. Ibid
- 9. Ibid
- 10. Anthony Galliano, 2016. “A transformative year for the tax regime in Cambodia”, The Phnom Penh Post, 16 December 2016.
- 11. Ayanna Runcie. “SMEs urged to register at Taxation Department.” The Phnom Penh Post, 27 August 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/smes-urged-register-taxation-department
- 12. May Kunmakara and Daniel de Carteret. “GDT threatens to publicly shame late payers.” The Phnom Penh Post, 5 June 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/gdt-threatens-publicly-shame-late-payers
- 13. Ven Rathavong, “Tax break for low income workers”, Khmer Times, 11 October 2017. http://www.khmertimeskh.com/5085586/tax-break-low-income-workers/ Accessed 28 October 2017.
- 14. Cheng Sokhorng. “Tax collections reflect increased payment options.” The Phnom Penh Post, 8 October 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/tax-collections-reflect-increased-payment-options
- 15. In 2015, the National Bank of Cambodia reported that Cambodia’s casino industry is making up about 40% of the total tourism’s revenues, or generates about US$ 2 billion in revenues a year. Sor Chandara. “Casinos rake in $ 2 billion.” The Phnom Penh Post, 1 October 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/casinos-rake-2-billion
- 16. Chan Muyhong. “Laws, tax collection lacking, government says.” The Phnom Penh Post, 26 May 2015. Accessed 20 October 2015, http://www.phnompenhpost.com/business/laws-tax-collection-lacking-govt-says
- 17. Constitution, article 90 new.
- 18. Open Development Cambodia. “Laws & Regulations: Budget Law 2015.” Accessed 20 October 2015, https://data.opendevelopmentcambodia.net/laws_record/budget-law-2015-2
