In response to allegations that the private sector in Cambodia is being unfairly treated on backdated taxes, the General Department of Taxation said yesterday it might show some leniency on the issue.
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Speaking to reporters on the sidelines of the fourth edition of the Tax Forum, held yesterday at The Grand Duke in Phnom Penh, GDT general director Kong Vibol said he will discuss the issue of retroactive tax with the private sector.
He said his department is just following existing laws when carrying out audits, but added that he will try to come to a common understanding with companies under audit.
“Even though by law we must reassess their books for ten years, we will not go that far in this process.
“We will have to work together and see what the private sector wants. If they decide to be fully compliant or promise to comply, we will not go back so many years.
“Some of the companies just recently started to be compliant. On the other hand, we will try to promote the idea for small and medium enterprises to adhere to tax compliance. This is according to the sub-decree I presented on the board, in order to broaden tax collection,” he said.
When asked whether complaints on retroactive tax came mostly from European firms, Mr Vibol said that dissatisfaction with the current auditing process was not confined to any particular group within the private sector.
“That is because you see, no one wants to be audited. But our tax department does not want to audit or penalise companies that are compliant. We go after those who do not comply with the laws. We have a proper assessment as well,” he said.
During his opening speech at the Tax Forum, EuroCham chairman Arnaud Darc said retroactive taxes should be reviewed, adding that such levies are generating great concern among members of the private sector.
He said the sentiment was they were being treated “unfairly and harshly” by the GDT.
Mr Darc raised the issue of European firms that decide to enter the regulatory fold only to be penalised with retroactive taxes.
The EuroCham chair called for fairness and supported the Ministry of Economy and Finance in its drive to implement a fairer and non-discriminatory revenue collection mechanism.
“Compliance remains a hot topic in our ongoing dialogue with the GDT. We want to be compliant and we want our competitors to be compliant so that we can all compete in this market while contributing our share to the national development.
“We have therefore been very active in discussing with the GDT the context and scope of the implementation of existing and new regulations to promote real compliance while making sure that Cambodia remains attractive to foreign investors,” he said.
He said he would be failing colleagues from other business associations and members of the chamber if he did not touch on the retroactive audits.
“While we comply fully, a great number of companies remain distraught by the harsh treatment they face when they choose to come clean and enter the realm of the formal economy.
“While we support the GDT’s efforts to broaden the tax base, so that more revenue can be collected for the betterment of the government budget, and ultimately the Cambodian people, I think we would all agree that such achievements should not imply that businesses that made an attempt to be compliant and to pay taxes should be hit by severe and backdated tax audits of, sometimes, up to ten years,” he said.
He said that, rather than having only a few companies contributing to the tax department, every company in the country must register with the GDT to share the burden evenly.
“We also think more effort should be made to get more companies to register with the GDT. Only then could the sustainability of the revenue growth be ensured,” he said.
He said he was surprised to learn that last year almost 50 percent of tax revenue came from penalties and reassessments, adding that the ratio in other countries averaged 10 percent.
This, he said, reinforced frustration among registered taxpayers who are doing everything they can to be complaint.