Cambodia: GDCE not to increase VAT despite impact of trade pacts

The General Department of Customs and Excise at the Ministry of Economy and Finance will not increase the value-added tax (VAT) on goods imported, despite acknowledging the loss in customs income due to the implementation of trade pacts.

Facing a loss in customs income due to the implementation of FTAs, the GDCE is considering lowering the VAT rate to items which support economic activities and reduce the burden on consumers, said its director-general Kun Nhim.

The government will check the possibility of easing the tax burden on people’s daily necessities, such as food and some consumer goods, he said last week.

Commodities used in SMEs, manufacturing and agro-industry, will also consider tax cuts to ease the burden on small and medium-sized enterprise owners and manufacturers, he added.

“In 2023, the General Department of Customs and Excise will consider reducing VAT taxes on goods for daily use and goods for small and medium enterprises (SMEs), production and agro-industry to reduce taxes or expenses of citizens and small and medium enterprises, including manufacturing and agro-industry, which are priority sectors,” Nhim said.

The GDCE is reviewing tariff rates on some items to be proposed to the Ministry of Economy and Finance to reduce some tariffs.

After Cambodia implemented various free trade agreements such as the RCEP, the Free Trade Agreement between Cambodia and China, and the Free Trade Agreement between Cambodia and Korea, Cambodia lost part of its customs revenue, according to the GDCE.

RCEP and Cambodia-China Free Trade Agreement came into force in January 2021 and the Cambodia-Korea FTA was enacted in December last year.

Under the trade pacts, almost all tariffs on goods imported from members of trade pacts are removed.

Despite making a loss in customs income, the trade pacts open up a larger market for Cambodia-made products.

According to the Ministry of Commerce’s report, Cambodia exported $5,671 million worth of goods to the members of the Regional Comprehensive Economic Partnership (RCEP) countries in eleven months of last year, an increase of 5 percent compared to the same period last year.

The RCEP pact has contributed to the country’s export growth in the nine months of last year, Penn Sovicheat, under-secretary of state at the Ministry of Commerce, said.

“Since entering into force earlier last year, Cambodia’s export to the RCEP member states has significantly increased,” Sovicheat told Khmer Times.

The GDCE has so far reviewed and raised special tariffs on some goods, focusing on luxury goods and goods that affect health and the environment, such as cigarettes and alcohol.

Cambodia collected around $2,690 million in customs revenues in 2022, exceeding 104.94 percent of the budget plan.