Consumers Feel the Effects of Tax Enforcement

Six weeks after customs officers were instructed to properly inspect and officially tax imports, market vendors and their customers say they are feeling the pinch as the price of some imported goods has increased by at least 20 percent.

Officials in the hospitality industry are now warning that restaurants and hotels could also feel the effect of the higher prices—if they have not already—as the cost of higher taxes is passed on to the consumer.
Luu Meng, president of the Cambodian Hotel Association, said yesterday that the price of imported goods has increased between 15 and 20 percent in the past month. "The increase in goods, I believe, is because the state is enforcing tax collection on imported good increased around 15 to 20 percent," Mr. Meng said.
"We, the hotel operators, are being affected and our profits are decreasing," he said, adding that prices would likely continue to increase gradually over the next six months.
At Phnom Penh markets this week, vendors said they have paid more for imported goods in the past month, and, at times, have had to raise prices to compensate.
Heang Srey Leak, 30, a food vendor at O'Russei Market, said yesterday that some of the imported meats she buys wholesale have increased in price by between 1,000 riel (about $0.25) and $1.
"My clients complain a lot," she said. "Other [vendors] told me that the increase in price of goods are a result of the enforcement of tax collection."
Since early November, customs officers have been ordered to inspect imported goods properly and collect taxes for the government in a bid to increase state revenue, said Bou Bunnara, chief of the public relations unit at the General Department of Customs and Excise.
Before, "taxes" at the country's borders were mostly paid in bribes to customs officers, a practice that still continues despite the government order, business owners said.
Mr. Bunnara yesterday denied that customs officers were still seeking bribes from importers on top of the taxes now being enforced. He also said he knew nothing about prices increasing as a result of the new government initiative.
"I don't know about the market, and I don't know about prices going up and down. Our task is to collect customs taxes 100 percent for the state," he said.
There are three types of taxes that an importer has to pay: customs import duties, exercise tax for specific goods and value added tax, according to Cambodia's General Department of Customs and Exercise.
For primary products and raw materials there is a 7 percent tax, for machinery and equipment the tax rate is 15 percent, for finished products and government-protected goods the rate is 35 percent and luxury goods are taxed at a rate of 50 percent.
The value added tax is a flat 10 percent on top of the other taxes.
Economists said this week that it was too early to tell if the tax enforcement will increase the country's overall inflation rate.
"There needs to be some sort of continuous change in order to see an inflation rate increase," Peter Brimble, senior country economist at the Asian Development Bank, said.
Srey Chanthy, interim president of the Cambodian Economic Association, said that with the higher cost of imported goods there could be a shift toward buying local products.
"People will shift from buying imported goods to buying the local goods. So, then, the number of local goods could become [scare] and not meet demand... and then those price will go up," he said.
Greg Hill, owner of the Lone Star Saloon and Guesthouse on Phnom Penh's Street 23, said yesterday that his staff has already witnessed a significant increase in price of goods at the local markets and supermarkets.
"It has affected my staff in day-to-day shopping. They are reporting prices up significantly, maybe 20 to 30 percent... Meat, beef, everything," he said.
Mr. Hill said he does not yet have plans to increase his prices, but that could change.
"We are going to absorb the added cost for a few months to see if this changes. if not, I will be forced to increase prices," he said