Fresh from organising a well-attended tax forum in Siem Reap this month, Chhiv Kimsroy, the tax committee director at the European Chamber of Commerce, sits down with Khmer Times’ Chea Vannak to share her views on Cambodia’s evolving tax system. The EuroCham Tax Forum in Siem Reap, the third such event organised by the chamber, was held on June 8, with a focus on the tourism and hospitality industries and the non-profit sector. The aim of the event was to enhance tax compliance in the country by giving SMEs a platform to ask tax-related questions directly to experts and officials from the General Department of Taxation (GDT).
KT: In your view, how efficient is Cambodia’s current tax system, and how much has it evolved in recent years?
Chhiv Kimsroy: There has been a number of very positive developments in terms of tax regulation in recent years. Previously, there was concern that our system was too broad and that regulation wasn’t clear enough. But now, due to the hard work of the tax department and the government, the system has been improved considerably. Furthermore, the government has had the support of organisations like the Asian Development Bank, the IMF and the World Bank to enhance the transparency of the system. The fact that more and more investors are choosing to put their money in the country is testament to the success of these reforms and to the government’s efforts to create an attractive business climate.
KT: Despite the government’s best efforts, a lot of SMEs in the country are still unregistered. What do you think can be done to bring more small companies into the fold?
Chhiv Kimsroy: Another recent step forward taken by the government is that it is now looking beyond just big corporations and big investment. Under the Industry Development Plan, the government is also focusing on SME growth. A big part of this is increasing compliance. The more companies that comply, the more transparent the system will be. As a result, the country will be more stable and competitive, and there will be more job creation.
To encourage more SMEs to operate legally, it is our understanding that the Ministry of Economy and Finance has recently issued a Prakas that gives a two-year tax break to companies that register in the next few months.
KT: Why are SMEs not registering?
Chhiv Kimsroy: A lot of SMEs are afraid that, if they register, they will have to pay for taxes retroactively, since they began their operations. To address this issue, I believe the Ministry of Economy and Finance and the GDT must work together to come up with proper regulation that reduces the burden for those that decide to register.
KT: The forum in Siem Reap revolved around the tourism and non-profit sectors. Why did EuroCham choose these sectors in particular?
Chhiv Kimsroy: The main reason is that non-profits operating in Cambodia have raised issues for many years regarding how difficult it is for them to comply with existing tax law. The original Law on Taxation was passed in 1997, but it is not really strictly enforced. The new Prakas issued by the Ministry of Economy and Finance does clarify things for non-profits when it comes to taxes. The purpose is to encourage compliance and collect non-direct taxes, which mostly refers to withholding taxes, paid to the government by the payer of the income rather than by the recipient.
Then we have hospitality. We understand that Cambodia is an agricultural nation, but we have a lot of potential when it comes to tourism. We already have a lot of tourists coming to the Kingdom every year, but to increase the number of visitors even further, we need to provide better services and products. A big part of offering better services is facilitating the tax-paying process for travel agents, airlines, hotels, and restaurants. Normally, businesses operating in this industry have a lot of questions when it comes to taxes, so we thought it was important to give them the opportunity to ask questions directly to the GDT.
