The General Department of Taxation (GDT) has rejected claims made on social media about the taxation of capital gains, claiming the misleading information is “slanderous”and it is committed to transparent and responsible taxation practices.

Cambodians have reacted on social media recently following the announcement of Kong Vibol, GDT Director General, regarding the implementation of the capital gains tax (CGT) set for January 2024.

Economist and financier, Ngeth Chou, expressed his views on the recent three-year extension of CGT on real estate in Cambodia. Chou highlights the economic irregularities related to financial and real estate issues in the country, raising concerns about the implementation and potential effects of the tax.

Chou emphasizes that Cambodia is currently facing an uncertain economic situation, and urged the Government to carefully study the impact before implementing such a national policy. Given the economy's poor performance, it is crucial to weigh the consequences before proceeding.

Chou noted that while the CGT has many types, the Cambodian economy lacks richness and diversity. He highlighted the real estate sector as the core of the economy, indicating people's preference for this industry.

Chou explained that the economy heavily relies on real estate transactions rather than fundamental economic factors.

According to Chou, the real estate sector in Cambodia revolves around buying and selling activities, rather than being based on the fundamental principles of the economy. He added that implementing the CGT may lead to serious problems since many parties engage in real estate transactions without sufficient cash flow to repay loans.

“CGT on valuable real estate could deter investment and create serious problems for borrowers,” Chou added.

Chou suggested that “the introduction of the new tax may prolong the current less trading activity in Cambodia for at least four to five years”. However, he does not dismiss the possibility of negative effects or that the Government cannot implement the tax.

Chou believes that the implementation of the CGT may have both positive and negative effects on the national budget. While the Government may generate additional revenue, he advised considering the impact on tax collection and the potential long-term slowdown of the economy.

“The need for detailed studies and analysis before making decisions on major national policies that could affect tax collection in other sectors,” Chou warned. “Failing to conduct detailed studies may result in a decline in the economy and reduced tax collection in various sectors.”

Chou urged the government to thoroughly study the pros and cons before deciding on the necessity of implementing the tax in the current circumstances. He emphasized the importance of considering taxation as a foundation for decision-making, rather than implementing major policies without a comprehensive understanding of their impact.

Chou acknowledged that deferring the CGT on real estate has brought some benefits, maintaining a few transition markets in the sector.

The implementation of CGT for taxpayers will now commence for five types of capital assets: leases, investment assets, business reputation, intellectual property, and foreign currency. according to the report.

Additionally, the CGT implementation for the real estate sector has been deferred until the end of 2024, demonstrating the government's commitment to supporting this vital sector.

The GDT urged the public to rely on official sources of information and to avoid sharing misleading or slanderous information.