The high-rate of special tax of 10-25 percent on oil for production is one of the burdens facing the advancement of manufacturing industries in Cambodia that have a target to increase added-value by using machinery in the production chain, according to the Japanese Business Association of Cambodia (JBAC).
JBAC said the total taxable amount of oils for production imported by only Japanese companies in Cambodia cost more than $12.5million a year.
The oils for production are used in manufacturing processes because it is impossible to purchase them in Cambodia.
The oils are for lubricating preparations and also used in grease treatment of textiles or other materials.
However, those are exempted from incentives for import duty (7-15 percent) and value-added tax at 10 percent, which this is the same for petroleum products such as gasoline even though the purpose for those oils is totally different from petroleum products.
“The above mentioned special tax, import duty and import VAT imposed on oil for production could be a key factor why manufacturing companies using machinery in Cambodia lose international competitiveness as well as hinder investments by high added-value industries,” it said. “This causes a very big barrier to investment by Japanese manufacturers.”
Earlier this month, Cambodia and Japan held the 20th session of the Cambodia-Japan Public-Private Meeting, when JBAC, which has about 270 member companies, raised issues which they want the government to deal with, such as cross-border logistics, electricity tariffs and taxation systems.
Japan’s Ambassador Mikami Masahiro told Khmer Times in an exclusive interview last week that Cambodia and Japan holds such a meeting twice a year for Japanese companies to share their serious problems with the Cambodian government and hear the progress in solving those problems from the government.
“It is a bilateral meeting only with Japan and we appreciate that the meeting contributes a lot to improving the investment environment of Cambodia not only for Japanese investors but also for others,” he said.