… Today we have to address the issue to its roots and we also have some proofs to present here in relation to income generation for the state coffer. We have talked a lot about good governance and covered all out aspects of the issue in the political platform of rectangular strategy. I would have the conference’s attention on an issue which is to generate income, while a lot has been discussed on how to spend money. I would like to flesh out some challenging issues for our discussion. Have we collected all the money that should have been collected already? I mean the tax payment that should have been collected by the customs. It is simple to say that we have not collected all of them yet. We have lost tax payment in many ways. First we used to have tax exemption problem. But since December 02, 1998, Cambodia ceased this form of tax loss. In the first term of the Royal Government, a member of the National Assembly could import two vehicles free of tax, and later it was followed by the Generals in the army and the police. We had hundreds of vehicles imported for no tax. It was on that day of December 02, 1998, that the culture of tax exemption had been finished.
… We now still have to face with problem of tax evasion where a mechanism has already been put in place but with so limited efficiency. I just had a discussion with HE Senior Minister and Minister of Finance Keat Chhon on this matter. In order to strengthen the tax collecting mechanism and its working efficiency, we have decided to reverse the 60% of collected tax in any anti-tax evasion operation for the budget of the provincial Government instead of paying to the central Government in Phnom Penh. Also, the 30% of the collected sum that is decided to be kept for awarding to operations will be left untouched, and the remaining 10% must be paid into the Anti-Tax Evasion Fund. To speak in a simple way, all 100% of tax payment from all anti-tax evasion operation is allowed to be kept for the local authority’s income.
… Yesterday I told guests from the IMF that I am very sorry of what had happened between 1987 and 2003. At that time each provincial authority proved to be effective in combating against tax evasion problem because they were allowed to make use of the collected sum. In fact the money is the lost amount of money, and this operation is to discover them and I think it is not a mistake for them to make use of it. I am thinking of establishing a hotline for any calls about this problem. If it were to discover any covert operation with the backing of any person, no matter if she/he is a General, prompt actions will be taken. May I affirm to Samdech and HE Ministers for Interior that I may place my order far beyond their lines of command – from central to provincial and to district levels, both civil, army and police — in incidents that may require immediate and timely actions in the anti tax evasion operation.
… As for loss of tax collection number two is a grave concern for me as this happens always on our desks. The Ministry of Economy and Finance need to push for an resolute reform in this front. In this form of tax loss, we had to discuss on three issues. First, importers lowered the cost of goods/items so as to achieve lower tax and excise. This form of evasion has been popular these days among tax evaders as it is one form of “legal” way to evade tax. In some instances we have discovered also that the Custom Office instructed SGS to lower the tax cost as well. Take for example here in this bill of import (Samdech Hun Sen showed to the conference members the bill) that recorded one battery costs only one US dollar! In this case, the most dangerous microbe that infects the tax system is those who are bestowed upon with the power to value the prices of goods. They have bigger a power than the Prime Minister and Minister for Economy and Finance. Has the Minister of Economy and Finance been ignorant on the matter? Does he know that these evaluators are signing on your behalf all the times? This case is very recent, November 04, 2004.
… Yesterday I talked to HE Senior Minister for Economy and Finance that maybe we should send the documents to the opposition party so that they could make public comments on it, because maybe with their help we could solve the problem of corruption in this field. This does not infer that I have colluded with the opposition, but they are not totally useless. This document does not come from the opposition, but from our auditing mechanism. The second form of tax loss in this manner is real items inside the containers does not correspond to those in the bill of lading. Take for instance, in the bill of lading, they declared those items to be children toys, but in reality those inside are spare parts for motorcycles, clothing, watches, radios and/or medicines. When this happens, it is nothing else but we have been cheated right before our own eyes. What is more painful for us is that they have made our system corrupted as they never avoid the system, but use our very system for their own interest.
… Reason number three for the loss is stolen amount of goods in containers that have never been declared so that they imported them tax free also under our very noses. With the amount of goods, less than what is exactly inside the container, declared, they could achieve also lowered tax and excise. Take for instance a container with SGS’s seal loads more than 1000 square meters of floor tiles, but in the same bill of lading, a container of same size, without the seal of SGS, it contains about 500 square meters of floor tiles. About half of the amount has gone missing. It is a dangerous situation and we are expecting to achieve tax payment of 12.17 percent of the total GDP. Therefore I request the meeting to come up with a solution to the three problems above. I wish to see an opportunity in the coming months of increasing amount of tax collection. It is true that the tax collection has increased twofold since 1999 but this is not corresponding to what we could have done for the best for our nation. This is what we have to do in search of the loss money.
… This issue could not imply to be a mistake under the responsibility of HE Pen Siman alone but the whole system must be checked and reorganized. I think Madame Men Sam An, Minister of Inspection should also be involved in this while setting up a group of its own economic experts which should then be receiving a copy of declared bill from the Customs Office and CamControl Department Head. In the course of inspecting, any irregularity must be reported for immediate actions. It is a must to find ways to increased income before discussing about how to split them, because if we could not garner income we could not realize our dream of increasing salary for the Government employees.
… As far as internal tax is concerned, we may pose a question as to whether we have collected all of them. My apparent guess to the question is no. I used to address the issues in a couple of meetings at the Cambodia Development Council and at the Intercontinental Hotel, and as I am fed up with negligence of my advice, yesterday I have removed a Head of Tax Department from his position. I think he should not be unhappy with this decision as he may have not had complete control of his department and it is in my competency to give such an order. As far as internal tax loss is concerned, I have discovered two forms of misconducts. First, tax has not been imposed on all available bases. The auditing mechanism inspected a district and discovered that 150 enterprises do not register. To say in short we have not collected tax from all production bases. Tax is being evaded right in the heart of Phnom Penh. From now on all concerned agencies must reinvest and register all of the available tax paying production bases. By doing so we could improve our tax income without having to increase tax.
… The second loss is that there continues a collusion which leads to tax deception. Take for instance if it is that they could charge 100% of tax, only 50 is written in the tax bill and the remaining 50 is left splitting 25% for tax collector and 25% for tax payer. I am asking all authority heads in this conference to discuss for a solution and come up with concrete actions to readjust this matter. If you may not dare to disclose this matter in the conference, now I have disclosed it and you should not feel uncomfortable to bring this matter out to light. If we were to let these problems going on, we will stand to lose good investors for corrupted ones, as good investors pay good tax to the Government and could stand to unequally compete with those corrupted ones. Sooner or later they would be bankrupted or they will resort to bad tax corruption habit as others. As far as custom officers are concerned I warn them that I have their names in a list already, and I know who is who because this is an important pulse for the Government. I could not neglect the danger from this pulse being cut off.
… It is important that private and state sectors collaborate with one another for an economic growth. I would declare to good business tax payers to collaborate with the authority concerned to disclose those tax evaders and deceivers. Information gained from this collaboration should help lead to firstly increase state income and to secondly guarantee their interests from accurate tax system. Thirdly, we should also discuss and resolve a long lasting issue relating to drawing cash from national treasury. It has happened for a long time already, as I learned and tried to solve this problem that before drawing the money, an off the record tax is charged. Sometimes it is a two ends on one string issue. It is either the national treasury’s fault in charging a sum of money before releasing the amount requested for or the financial officers from the state institutions misinformed their heads of institutions that they could not get a full payment from the treasures.
… I suggest to the heads of all institutions that they must not give their signatures if they do not get the right amount of money and again I request HE Man Sam An to inspect this incident as well. Any institution head who signed to receive an incomplete amount of money, s/he will have to take full responsibility for giving his/her signatures. If we are doing so we could get hold of the offenders in no time for trial. This incident also had happened in the private sector, which I gave my advice many times. Take for instance, to run an affair, the private sector processor told his senior official that the state official from concerned agency charge him 50$, while in fact he was either uncharged or charge with less the amount.
… Another matter of significance is what I declared on December 2, at the inauguration of the Oknha Mong port that I decided to decentralize decision making concerning any investment project of two million dollars and below to the provincial level authority. We have yet to issue a sub-decree on this matter, but it would take just a signature and it will go into force. What I wish to warn here is that in this operation, only one standard will be applied on all investment project and we can’t afford to have one standard for this province and another for that one. This could also go into a competition from which we can single out province that attracts more investments.
… Yesterday I met with two groups of provincial delegations from Vietnam to discuss investment opportunity. Cambodia has become a member of the World Trade Organization, while Vietnam has not. Vietnam has got goods but has not got a market. Why don’t we collaborate? Vietnam has got capital and technology, and Cambodia has got a market, so a production could take place in Cambodia. It is similar for another part of Cambodia as far as investment opportunity with Thailand is concerned. These are the four main topics that I wish to bring to your attention prior to the meeting discussion. I know that my address today would disappoint some people, but it is al right. What is unacceptable is the disappointment caused by the loss of national interest…
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