PM seeks tax break for low earners

Prime Minister Hun Sen speaks at an event yesterday at the Peace Palace in Phnom Penh, where he called for an increase to the minimum income tax threshold. Facebook

11 Oct, 2017 - Ben Sokhean and Ananth Baliga

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Prime Minister Hun Sen yesterday announced that he would ask parliament to raise the threshold on taxable income to relieve taxpayers beginning at the start of next year, another in a string of populist moves before next year’s elections.

Speaking at the launch ceremony of a vocational training policy, the premier said his government would ask the National Assembly to approve an increase of the tax threshold to $300 from the current $250 when the national budget is up for a vote.

“This benefit is not only for the government officials, armed forces, but the workers in all sectors. It means that from $300 or less they will not have to pay the tax.”

“But the important thing is that the National Assembly will support this because it is in the budget and we will implement it from January 2018,” he said.

A similar move was made last year when the threshold was increased from $200, up from $125 in 2014. Civil servant wages are also expected to go up to $250 in 2018 – a 2013 CNRP election pledge that was adopted by the premier in 2014, despite initial apprehensions.

The move is one of a handful of recent populist announcements that will benefit the pocketbooks of large blocs of voters. On Monday, Hun Sen promised a $200 baby bonus for civil servants, armed forces and police officials, $400 for twins and $600 for triplets – with a similar pledge made to garment workers last month, though at a lower rate per child.

The premier has made a string of promises to garment workers, whom he has met with on a weekly basis for the past two months. These include free bus rides in Phnom Penh, maternity pay equal to 120 percent of their salary, free health care and a minimum wage of at least $160 – which was last week fixed at $170, with Hun Sen’s customary $5 bump included.

Nup Sothun Vichet, a spokesman for the Ministry of Economy and Finance, said he didn’t yet know how much the premier’s largesse will cost but said the Council of Ministers will hold a meeting next week to discuss details.

National Assembly spokesman Leng Peng Long said that he was unaware of the budget proposal but the appropriations bill would be voted on in late October or early November.

Cambodia National Rescue Party lawmaker Ou Chanrath welcomed the government’s plan but urged upping the threshold to 1.5 million riel, or close to $370.

“I think that this is not wrong since the living standards of people whose salary is around 1.2 million riel [$250] is still low, and if they need to pay the tax there is going to be less [savings] for each family,” he said.

Chan Sophal, the director for the Centre for Policy Studies, said the government wouldn’t lose much income to the tax breaks and said the motive for the move was apparent.

“The motive you can understand yourself. It is normal when you are not required to pay taxes, you will be happy,” he said, while also suggesting tax rate increases for the upper echelons of Cambodian society.

Miguel Chanco, lead Asean analyst for the Economist Intelligence Unit, said it was reasonable for a country of Cambodia’s level of economic development to increase such thresholds from year to year. This, he said, could have a small economic impact on the country’s budget deficit, but was also to be expected with elections around the corner.

“The budget deficit will widen on two fronts – we expect the government to offer tax perks (to low-income households in particular) and boost spending, especially in social areas and in public-sector pay, in the near term in view of the upcoming election,” he wrote by email.