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Tax perks lose GDCE ‘nearly $800M’ over recent years

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GDCE data shows that in the first half of 2022, Cambodia’s international trade totalled $27.244 billion or 20.158 per cent more than the corresponding period last year. Heng Chivoan

Tax perks lose GDCE ‘nearly $800M’ over recent years

The General Department of Customs and Excise of Cambodia (GDCE) has lost “nearly $800 million” in revenue over recent years as a result of preferential tax treatment under free trade agreements (FTA), incentives for investments in the automotive and electronics sectors, and other perks for local businesses, according to a deputy director-general at the department.

Speaking at an August 2 press conference on the achievements of the Ministry of Economy and Finance – the GDCE’s parent ministry – over the past five years, department deputy director-general Pha Engveng said that, before 2019, customs revenue had grown at an annual rate of between 10 per cent and more than 27 per cent.

He commented that 2019 brought in an all-time record growth rate. According to a ministry statement, the GDCE’s revenues grew 30 per cent that year to about $3.215 billion, topping 13 trillion riel.

Engveng said that although the budget laws for 2019 and 2020 set out higher revenue targets for the GDCE than the General Department of Taxation (GDT) – also under the finance ministry – collection ended up “slightly lower” than its sister department for both years.

Customs revenue fell short of the 2020 target, largely due to Covid-19, he said, adding that collection picked up a bit in 2021 but still failed to meet the goal.

As the GDCE’s revenues are mainly tied to international trade activities, collection will be congruent with global economic trends, he explained.

“Cambodia has entered into FTAs under ASEAN and ASEAN Plus. And, just in the first half of this year, we’ve taken into account that the quantum of duty-free imports from ASEAN countries is close to $200 million,” Engveng said.

Without providing a concrete timeframe for reference, he added that the GDCE has lost “more than $500 million” in revenue owing to the duty-free import of raw materials and equipment used in the production of domestic substitute products.

The department could lose around $60-70 million this year due to a road map for the automotive and electronics sectors recently prepared by the government in an effort to shift manufacturing from labour-intensive processes to hi-tech models, he said.

Having collected 50 per cent of the full-year revenue target for 2022 by June 30, the GDCE is expected to meet or slightly surpass the mark by the end of the year, he added.

Hong Vanak, an economist at the Royal Academy of Cambodia, explained that in general, developing countries need to import more, but also export more currency. Hence even if customs revenues are high, zero-trade balances are not all that desirable, he opined.

“A reduction in tariff revenues may be a minor issue, but it won’t have a significant impact on the Cambodian economy. Obviously, in principle, when an FTA is signed, tariff barriers must be removed. Therefore, we should encourage more exports, such as agricultural and industrial goods, to strengthen our economy,” he said.

GDCE data shows that in the first half of 2022, Cambodia’s international trade totalled $27.244 billion or 20.158 per cent more than the corresponding period last year.

Of that, imports grew 11.913 per cent to $15.865 billion, while exports were valued at worth $11.379 billion, up 33.913 per cent. The Kingdom’s trade deficit for the first half narrowed by 21.009 per cent year-on-year to $4.486 billion.


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