Cambodia Raises its Income Tax Threshold

January 14, 2015 Posted by ASEAN Briefing Reading Time: 4 minutes

At the beginning of January, Cambodia reduced the income tax burden on workers in the country. The government has raised its tax threshold from 500,000 riel (US$125) to 800,000 riel (US$200). The previous lowest income tax bracket had begun at 500,000 riel, at a rate of five percent.

This change puts approximately US$3.75 a month back into the pockets of workers in Cambodia earning over US$200 per month. The change had been announced by Prime Minister Hun Sen in October 2014. Those contracted under a net salary will not be effected.

Hiroshi Suzuki, Chief Economist for the Business Research Institute for Cambodia, has said that the change will assist garment sector workers in securing wages. The alteration is expected by Hun Sen to only deprive the treasury of US$10 million in lost revenues, from an expected US$2.1 billion in revenues in 2015.

According to a Deloitte University Press report, Cambodian tax revenues in 2013 amounted to only five percent of GDP. However, they are on the up; the General Department of Customs and Excise (GDCE) has reported that it earned US$1.34 billion in 2014, a year-on-year increase of 33.5 percent, accounting for 7.8 percent of GDP.

Cambodia’s GDP per capita remains extremely low by international standards; the World Bank estimates that it reached US$1,007 per annum in 2013. Per capita GDP growth slowed from 12.1 percent (2010-2011) to 6.6 percent (2012-2013). This reduced tax burden is a step in the right direction to offset the slowing worker salary growth, but the change remains minor. Much headway has been made in driving down Cambodia’s high poverty levels, and the poverty rate more than halved from 53 percent in 2004 to 20.5 percent in 2011 by World Bank measures, well ahead of its goal of halving poverty by 2015.

In the World Bank Group’s Doing Business 2015: Going Beyond Efficiency, Cambodia ranks 90th of 189 economies for ease of paying taxes, just below the regional East Asia & Pacific average. Cambodia remains ahead of China, Laos, the Philippines, and far ahead of Indonesia. On average, firms in Cambodia make 40 tax payments per year, spending 173 hours filing, preparing and paying taxes. Total taxes amount to 21 percent of profit.

If you would like a customized report on Cambodian taxes, please contact Asia Briefing at: editor@asiabriefing.com

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