Taxation & Business

Tax Law Slated to be Passed by End of Year

A new law on taxation that has been in draft for seven years is expected to be approved by parliament at the end of the year as part of efforts to bolster the government’s tax collection process
Businesspeople attend AmCham Tax Updates and Audits, Phnom Penh, September 28, 2022. Kiripost/Siv Channa
Businesspeople attend AmCham Tax Updates and Audits, Phnom Penh, September 28, 2022. Kiripost/Siv Channa

A new law on taxation is expected to be passed by parliament at the end of this year, the head of the taxation department told a business forum amid the government’s expansion of broad-based tax collection efforts countrywide.

Since the law on investment was promulgated, Kong Vibol, Director General of General Department of Taxation (GDT), said it is normal that this works closely with the law on taxation, which has been in the drafting stage for the last six to seven years.

The new draft taxation law is now with the Ministry of Economy and Finance, Vibol said, adding that the Justice Ministry is also reviewing articles about criminal code and clauses that go along with other laws.

Vibol was speaking at a tax and audit updates forum on Wednesday, which was jointly hosted by the American Chamber of Commerce in Cambodia (AmCham) at Raffles Hotel Le Royal.

Kong Vibol, Director General of General Department of Taxation (GDT). Kiripost/Siv Channa
Kong Vibol, Director General of General Department of Taxation (GDT). Kiripost/Siv Channa

Vibol said he has been working on this draft law for six to seven years and it is based on recent economic development changes and has received inputs from the private sector through a tax working group.

“These inputs we formulate into the draft law, which makes life easy for all of you and to go along with the law on investment as well, so hopefully by the end of this year, or this mandate, the new tax law will be passed by the government and parliament,” he said.

“Now it is in the hands of the Minister of Finance, so it is just an update but most of the articles remain the same and some of the unclear and some of the input from the private sector we consider amending in the tax law.”

At the helm of the GDT, Vibol said tax reforms have been the most challenging job for him, highlighting examples of unqualified staff when he began work there. Some staff failed to understand what a tax audit is and were also unable to read financial statements from public listed companies.

“Civil servant law would not allow me to [make] redundant those people. If you become the CEO of a big corporation, they come and overhaul the whole thing, especially employees. They cut 5,000, 10,000 staff, and recruit, maybe, 20,000 or less. I don't know but for me, the most difficult part is human resources,” Vibol said.

He added that the GDT now has the most qualified staff after training them as part of his reforms. He said he has recruited some few hundreds of tax auditors and managers, some of whom are well-trained from the private sector.

“In Cambodia, there is a saying that when there is cold water, the fish will stay in the cold water.”

Vibol also talked about the achievements of the GDP under his leadership in which people can now pay taxes online.

“In the past, you carried a bag of money to pay, you lined up. Sometimes, to be honest, you even need to pay a bribe to pay tax because you don’t need to wait,” Vibol said.

Now the system has changed from carrying around money in bags, people can pay taxes through E-filing, which can cross check invoices when uploaded into the system.

Reforms have been essential and continuous at GDT, especially on the part of digitalizing tax payments, he said, which need a lot of bravery and commitment.

“Because not everyone wants to pay tax if they can get away with it, but you make a system easy to pay. Thanks to the system, it makes life easy for you, it makes life easy for us also.”

He said his mission was to enable businesses to register with three ministries in one transaction, a recommendation he lodged with finance minister Aun Pornmoniroth after attending a World Bank conference in which people complained about the difficulties registering businesses in Cambodia.

The single online business registration was implemented two-and-a-half years ago.

AmCham President, Anthony Galliano, said the event is the first time AmCham and GDT have worked together on a tax forum, adding that AmCham fully embraces and welcomes private-public sector cooperation, not only as membership advocacy but also to enjoy endeavors to educate and inform the marketplace of development, regulations and best practices.

“Indeed, our members place tax as the most important area of business. They want to remain informed and stay current. They want to understand best practices to stay compliant to mitigate their business risks and to keep pace with the changing regulatory environment and digitization initiatives,” Galliano said.

AmCham President, Anthony Galliano. Kiripost/Siv Channa
AmCham President, Anthony Galliano. Kiripost/Siv Channa

“I think it is fair to say paying taxes is something that everyone loves to hate. In fact, there is a famous quote on the subject. People who complain about the taxes can be divided into two areas, men and women.”

However, they should not feel this way, he said, adding that people should reflect on why paying tax is so important as individuals, as citizens and as guests.

Taxes are the primary source of revenue for the government and pay for public goods and services. They are also the key ingredient in the social contract between citizens and the economy, he said.

Taxes are collected to improve and maintain public infrastructure such as roads and public services such as schools, hospitals and welfare programs and pay for civil servants such as army and police to protect citizens and the border, Galliano added.

He noted that people receiving free vaccinations and boosters to protect against Covid is a supreme case of paying taxes, in which it is a civic obligation and duty to help build and grow the nation.

Galliano praised the GDT for its progress and achievements over the years and those achievements include impactful digitalization of E-filing tax payment.

Previously, Galliano said he had to go to the bank carrying US dollar bills and convert to riels to pay tax, get the receipt and show it to tax officials, and it took hours just to complete bank transfers and filling forms.

Everything is now online, and it saves a lot of money on costs and staff, he said. Online business registration is now competing with Singapore, taking 14 business days to register a business once for all the three ministries of commerce, GDT and labor, he said, adding the process used to take months.

Join us on Telegram