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Vehicle Tax Cut Gets Mixed Reaction

Sum Manet / Khmer Times Share:
KT/ Fabien Mouret

The government will eliminate taxes on vehicles used by low-income families and farmers to improve their livelihoods and boost farm production, according to the bill on the national budget approved by Prime Minister Hun Sen yesterday.  

The government will lose about $1.43 million in tax revenues, according to the bill. The tax elimination will apply to motorcycles, tuk-tuks and go yung (three-wheeled, motorized vehicles used in rural areas), small boats and tractors. 

The tax elimination is expected to boost production on farms and make transportation easier for families who live along rivers, lakes and the coast, officials said.  

Phay Siphan, spokesman for the Council of Ministers, said the tax break will take effect next year. 

“It is a policy that reduces the burden on low-income people and in general boosts the agricultural sector,” he said, adding that the tax breaks for farming equipment makes sense in a country where 80 per cent of the population relies on the agricultural sector to make a living.

Economist Srey Chanthy was less enthusiastic about the tax elimination than Mr. Siphan. He said the taxes were already minimal and that they would not have much impact in alleviating poverty or sparking more growth in the agriculture sector. 

“I don’t know how much the annual tax is on a tractor or a small boat, but the annual tax on a motorbike is small – only 5,000 riel [about $1.25] or less,” he said. 

“This amount of tax is not a burden. It is about 15 riel or less a day. Not many small-scale farmers own tractors,” he added. 

“Medium-scale or large-scale farmers or plantations owners do [own tractors],” he said. 

He said the annual tax has several benefits, including instilling respect for the rule of law, pushing good governance, and encouraging people to demand accountability from the government. 

Mr. Chanthy said a better option than eliminating the taxes altogether would be to exclude the poor from paying them.  It could do this easily as it already has compiled a list of so-called “ID poor.” People identified as ID Poor can use their ID cards to obtain free service at government health centers and hospitals, for example. Eliminating the taxes altogether would mean that those who can easily afford to pay them would no longer have to, the economist said. 

The government plans to spend $4.3 billion in 2016, up 16.1 percent over this year. Taxes collected on about 1.3 million motorcycles, tuk-tuks and go yung totaled about 5.75 billion riel (about $1.4 million) last year. Taxes collected on 806 tractors totaled about 40 million riel (about $1,000) last year, while taxes collected on 817 small-scale boats totaled about 12 million riel (about $3,000) last year.

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