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Tax department rakes $2 billion with reforms and audits

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Kong Vibol, director-general of the General Department of Taxation. KT

Kong Vibol, director-general of the General Department of Taxation, told Khmer Times Editors that the department has collected a whopping $2 billion in the last five years. He said a massive reform drive alongside a stop in leakages bore favourable results but the department is not resting on its laurels. Mr Vibol also tackled the accusations flaunted on Al-Jazeera against him.

KT: Just a few weeks before Cambodia’s national elections on July 29, Aljazeera featured an interview with you in which
allegations about your relatives owning and running a petrol company in Cambodia and that you engaged in fraudulent, corrupt and other illegal business activities in Australia were made. Could you kindly comment on this sudden turn during that interview?

Mr Vibol: My point is that BVM is not alone in this technical error vacuum – you can check the Ministry of Commerce’s website on any company registration including Chevron, Caltex, Total, Tela, Sokimex and any other companies. From there you will see why Aljazeera only targeted BVM but did not do so on other companies. They just wanted to destroy my reputation.
Unfortunately, BVM has become a victim of this technical error. The company has been paying both imported tax and internal tax since 2008 at an average of at least $25 million annually – or a total of almost $230 million in the past 10 years (2008–2017). This is according to the figures obtained from the General Department of Custom and Excise and the General Department of Taxation and BVM.

KT: How did you achieve the country’s remarkable tax collection rate in recent years?

Mr Vibol: From 2012 to 2017, the tax revenue increased by 257 percent and this was possible due to the reforms that I initiated. This is an increase of $2 billion from $500 million in tax collection. Part of the reforms centered on the
reduction of audits for companies. The department also plugged the leakages. The reforms brought in stopped the leakages.
We have audited 10 to 15,000 companies from which we collected $2 billion in the past five years.

KT: Can you tell us what the main focus in the drive for reforms was since you took over?

Mr Vibol: I focused on the government’s rectangular strategy. I choose one particular angle in this strategy that is good governance. I prepared a good system, eliminated loopholes, and set up a proper conduct of the civil servants by reforming the habit of working and changing the mindset of the people. When you get governance to be stronger, you get good administrative procedures.
We jotted all the weak points in our revenue mobilisation strategy, from there we improved. In the medium term between 2014-2018, we focused on administrative reforms. We tackled the five core reforms in tax registration, taxpayer service, tax filing service, audit management system and tax area management as well as appeal management.
These were in line with the restructuring of the taxation
department. They included the
introduction of a new IT system and the development of our own database to support the five core elements.

KT: Is the department conducting more audits?

Mr Vibol: Part of the reforms was to reduce audits for companies. If they comply and pay a fair amount of taxes, we do not have to go through auditing their accounts and give them a lot of trouble.
With this strategy, the
department reduced the risk factors. We only have to audit the high risk, non-compliant payers, and this allowed for the redistribution of officers to focus on non-compliant payers.

KT: Was the high tax collection achieved with the introduction of new taxes?

Mr Vibol: The government did not want to introduce new taxes in the last mandate, but the department had recourse to various tools, including audits and reforms, to increase its revenue collection
capability and stop leakages.
On the governance side, we have to be more transparent.
We issue a tax invoice from our database. Even banks issue tax receipts, which must be printed with information that is keyed into our tax system. That is printing the receipt from our existing database, not from the bank’s database. After that, the bank will take the receipt and key it into their system. This is a major reform for the tax department.
If you pay your car taxation, you do not have to print any receipt. Just bring your card and it will be done. We are now trying to work on property tax, water supply and so on.
With these, you can do payment through your phone, online or through credit cards. It is easier for taxpayers to pay for the services.

KT: What is the biggest challenge for the department in its next moves?

Mr Vibol: More reforms were done in this mandate, but the challenge will be to collect more taxes. I do not know what the
government’s policy is next. Whether they will introduce a new tax or increase some taxes that have to be increased or rationalise some of the incentives. On the other hand, we might have some incentives that have expired, such as in the rice sector. For some of the sectors, there should not be such incentives anymore.
As for the next growth sector for the tax collection department, they may be the SMEs.
Everyone must be brought in to pay taxes though this is going to be challenging for the department. We need to drive growth in this sector to create more jobs. We need to get them to register and to pay taxes. This is the next challenge for the department.
There must be a level playing field. Taxpayers are complaining that it is not fair they pay taxes while others are not paying. This is not fair competition.

KT: There are claims of discrepancies in the company registration at the Ministry of Commerce compared to the registration at the Tax Department. How is the department dealing with that?

Mr Vibol: I am aware of the discrepancies in the registration of companies with the Tax Department and the Department of Commerce. By law, after they register with the Ministry of Commerce, they have fifteen days to register with the Tax Department. Some information may be wrongly submitted. But as a Tax Department, we require the correct information which we double check through other departments.
If they give false identification, we check with the Ministry of Interior or we go directly to their addresses. In some cases, we find out that the address is incorrect. It is risky for the department to lose revenue if they file in a false registration. It involves other parties that come to claim their VAT credits. Some may sign a construction contract worth $2 million, this represents a VAT of $200,000 which is collected from contractors but if they fail to pay to the Tax Department, we cannot trace that amount.
They cannot get away with that. Prior to that, there was no need for them to supply this information and they kept collecting VAT while not paying us and then ran away. And we ended up losing money by repaying VAT credits. In the end, governance is the most effective way to go in revenue collection. If you set good governance, all the staff will follow and the revenue collection will not be weak. If it is followed well, you will be successful in any reforms done.

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