Thailand
Cambodia: Gov’t coffers versus tax breaks: a debate
The deteriorating global economic situation, with no timeframe of improvement in sight, continues to severely and demonstrably impact the Kingdom.
Tax incentives to date have generally been limited to the garment and hospitality industries, with most incentives under limited timeframes and some tied to specific taxes, said Anthony Galliano, Group CEO of a corporate finance firm Investment Management.
“This is an extremely difficult time when businesses need support, the tourist industry is decimated, the garment sector is on shaky legs, real estate is plummeting and all businesses are asking for support.
The last thing they need is audits, especially comprehensive ones, at this time. There have been very few tax incentives, apart from the bits and pieces for tourist and hospitality,” he said.
Beyond hospitality, garment, and real estate, other sectors are increasingly feeling the brunt of the downturn, especially SMEs and specifically education, retail, advertising, consulting and trading.
“There is deep concern that a lot of businesses that have supposedly closed temporarily, may not resurrect, especially hospitality, and that surviving businesses will continually weaken without additional support and incentives. Increasingly there are signs posted on buildings for rent, looking for shareholders, or simply closed,” Anthony continued.
Anthony, whose career has been mainly in international corporate and investment banking for nearly 20 years, said the respite on audits in hospitality in Siem Reap is constructive, but this is effectively only being given to those businesses that are temporarily or permanently closed in the province.
“Unfortunately, audits at this time of economic crisis and disruption, with most businesses having limited human resources, due to retrenchments and stretched financials, will greatly challenge businesses at the most inopportune time,” he said.
While tax collection needs to be preserved, Anthony said it is critical that businesses in unstable and fragile positions are shielded. “It is a testing time to maintain a balance between replenishing the national coffers with much-needed tax revenues, and tactics for doing so, without causing more harm to struggling businesses in unprecedented economic times,” he added.
Anthony suggests that it is probably wiser to sacrifice tax revenues in the short-term and offer incentives to help safeguard businesses and to secure a robust and healthy economy in the long-term.
Apart from the recent closures and suspensions of many businesses another emerging trend for concern is the substantial drop in new business registrations, Anthony observes. To reverse this trend, he says that a fast-track and easy suspension process by the General Department of Taxation (GDT) would be beneficial. Preservation of positive cash-flow in very difficult economic times is of the utmost priority.
“Businesses typically pay bills late or default, and a significant challenge for taxpayers is financing VAT on an accrual basis while actual payment is on a cash basis. A generically beneficial incentive, probably best limited to medium and small taxpayers, would be to allow VAT to be paid on a cash basis rather than accrual,” Anthony said.
One way the impact on tax revenues can be mitigated is by not permitting the VAT credit unless the purchaser has paid the bill. “There has been positive government encouragement for landlords to assist on rental reductions and suspensions, so a supportive tax incentive would be to suspend withholding tax or VAT on rent,” he concluded.
Source: https://www.khmertimeskh.com/50716386/govt-coffers-versus-tax-breaks-a-debate/