Cambodia Thrives Despite Low Taxes: Insights from Pen Bona The Royal Government of Cambodia has established one of the most favorable tax regimes in the world, prioritizing the well-being of its citizens, especially the poor and low-income groups. Pen Bona, ...Read more
Cambodia Thrives Despite Low Taxes: Insights from Pen Bona
The Royal Government of Cambodia has established one of the most favorable tax regimes in the world, prioritizing the well-being of its citizens, especially the poor and low-income groups. Pen Bona, Chief of the Government Spokespersons Unit (RGSU), highlighted these efforts in a recent statement, underscoring the government’s commitment to avoiding taxes on essential sectors.
A Tax Regime for the People
The Cambodian government exempts family farmland, agricultural materials, agricultural products, and real estate valued below 100 million riels (approximately $25,000) from taxation. Additionally, the transfer of ownership of immovable property valued at or below $70,000 is exempt from stamp duty, and no stamp duty is imposed on transfer inheritance as a one-time gift. Motorcycles and tricycles are also tax-exempt, as are monthly salaries under 1.5 million riels (about $375).
Small business owners with a turnover less than 250 million riels benefit from tax exemptions, and there are various concessions and exemptions to support disadvantaged businesses. These measures ensure that the poor and vulnerable are not burdened by taxes, and instead receive significant state support.
Support for the Vulnerable
During the COVID-19 pandemic, the Cambodian government spent over $1.2 billion to assist poor and vulnerable populations. Even today, under six priority policy programs, the government provides ongoing support, including health services, free vocational training for youth, and monthly financial assistance.
Numerous informal economic development policies, national programs, social assistance initiatives, and agricultural protection policies further bolster support for the poor. Despite recommendations from international financial institutions and development partners to increase tax collection, the Cambodian People’s Party (CPP)-led government continues to prioritize preferential tax policies for the less fortunate.
Economic Growth Amid Low Taxes
Remarkably, Cambodia is recognized by the United Nations as one of the fastest-growing countries globally, despite its low tax rates. Emerging from the devastation of war and genocide, Cambodia has transformed from a poor nation to a low-middle-income country, aiming to achieve high-middle-income status by 2030 and high-income status by 2050.
Bona highlighted that despite having low taxes, the United Nations recognizes Cambodia as one of the world’s fastest-growing nations. “Rising from the devastation of war and genocide, Cambodia has transitioned from a poor country to a low-middle-income country and is on track to become a high-middle-income country by 2030 and a high-income country by 2050,” he stated.
“The visible signs of peace and development, such as roads, bridges, schools, hospitals, skyscrapers, shops, supermarkets, and the smiles of the people, all attest to our progress. It’s uncommon to see a country with such low taxes achieve such rapid development,” he remarked.
Pen Bona, Chief of the Government Spokespersons Unit (RGSU)
Physical infrastructure developments, such as roads, bridges, schools, hospitals, skyscrapers, shops, and supermarkets, reflect Cambodia’s rapid progress. Pen Bona credits these achievements to the leadership of former Prime Minister Hun Sen and current Prime Minister Hun Manet.
According to the International Monetary Fund’s (IMF’s) Regional Economic Outlook April 2024, Cambodia is projected to grow at a rate of six percent in 2024 and 6.1 percent in 2025, trailing only the Philippines within ASEAN. Inflation is expected to remain stable at 2.3 percent this year, slightly up from 2.1 percent in 2023, aligning with trends across Asia and the Pacific. The report also notes that Cambodia’s economy grew by five percent in 2023.
Historical Context: Taxation in Cambodia
The history of taxation in Cambodia has evolved significantly over the years. During the early years of independence, the tax system was rudimentary, focusing primarily on agricultural products and basic goods. However, the civil war and the Khmer Rouge era severely disrupted economic activities and tax collection mechanisms.
In the post-Khmer Rouge period, efforts were made to rebuild the economy and establish a functional tax system. By the 1990s, with the help of international organizations, Cambodia began to implement more structured tax policies. The introduction of the Value Added Tax (VAT) in 1999 marked a significant milestone in modernizing the tax system.
Throughout the 2000s, reforms continued, aiming to improve tax compliance and broaden the tax base. These efforts were complemented by initiatives to support economic growth, attract foreign investment, and provide social assistance. Today, Cambodia’s tax policies reflect a balance between fostering economic development and ensuring social equity.
For further details on Cambodia’s taxation and economic growth, you can refer to the official sources here.
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