16 April 2014
Cambodia urgently
needs public finance reform to address its persistent budget deficit, which is
caused by one of the lowest tax revenues in the developing world, according to
a report from the Deloitte University Press.
The March edition of
the press’ quarterly Asia Pacific Economic Outlook says total tax revenues last
year were USD881 million, just above 5% of gross domestic product (GDP). This
figure is much below corresponding levels in developing and emerging-economy
peers and is the main cause of persistent budget deficits. Given the need for
the country to spend more on sectors such as health, education and
infrastructure, the current tax system is untenable.
Although the Deloitte
report did not provide comparative regional figures for tax revenue to GDP
ratio, the Organization for Economic Cooperation and Development (OECD) noted
in a 2013 report that Cambodia was among Southeast Asia’s least efficient tax collectors.
The tax ratios vary
considerably across Southeast Asia, with the ratios for Cambodia, Laos,
Indonesia and the Philippines being roughly two-thirds that for Thailand and
about half that of Vietnam, the country with the highest ratio.
The Deloitte report
goes on to say that Cambodia’s public finances need to be more transparent. In
the budget for 2014, more than USD1.5 billion of funds remain unallocated or
are placed under ‘miscellaneous’ expenses. Critics allege that this nebulous
allotment encourages corruption, something on which Cambodia rates high.
Vongsey Vissoth, a
secretary of state at the Ministry of Finance, dismissed the findings in the
report, saying the tax-to-GDP ratio is higher than 5%, but declining to give an
alternate estimate. He added that the government is working to increase the
ratio by 0.5% year on year, noting recent efforts to more strictly enforce
customs tax collection. This evaluation is not correct. On the contrary, our
tax revenue grows from year to year.
Regarding a lack of
transparency in the allocation of the budget, He said the government has made
an effort to spend more efficiently on prioritized sectors, including education
and health. The government is strict on curbing lavish expenditures and tries
to focus spending on the main targets.
Srey Chanthy, an
independent economist, said the low tax revenue was causing the government to
take on increasing foreign debt to make up for budget shortfalls. The result is
Cambodia can’t finance public services and projects and we have to keep borrowing
from multinational sources.
Source:
http://www.cambodiadaily.com/news/cambodia-needs-to-reform-public-finances-report-says-56607/
