[PHNOM PENH POST]
COMMON economic sense usually dictates the state should never over tax a
subdued economy – doing so usually only stifles growth, just ask many
of the governments in Europe. But in the case of Cambodia’s property
market, the government has rightly prioritised tax sooner rather than
later.
Following a 60-percent rise last year in the collection
of property transaction taxes to $20 million, Phnom Penh Governor Kep
Chuktema’s stated aim last week to collect $12 million in new property
taxes in the capital for the first year up to the end of September is a
positive sign, even with the sector still struggling.
Better
enforcement of taxes and the new property tax will help calibrate fiscal
regulation of a sector that has escaped taxation in the past. Cambodia
should therefore avoid a return to the days of speculative selling in
which money was disproportionately poured into an unregulated housing
and property market and unrealistic rents and sale prices went through
the roof. As soon as possible was definitely the right time for the
government to act despite landowner complaints the property rebound may
take even longer as a result.
On property, the government
therefore seems to be demonstrating it is ready to enforce taxation law
and apply taxes that largely avoid discriminating against the poor,
crucial steps in a country renowned for poor legal enforcement and a
general unwillingness to hold the rich and powerful economically
accountable. With the threshold set above 100 million riel (US$24,510)
and agricultural land exempt the new tax will avoid poor landowners
including the key farming sector. Importantly, buildings under
construction will also remain exempt, meaning the tax will have little
or no adverse impact on struggling projects such as stalled Gold Tower
42.
There are potential problems with this new tax, however.
Valuations have been questioned given the difficulties associated with
determining price in a market that has seen so little activity in the
past two years. Also, the government has to make sure exemptions that
include agricultural land in particular are not exploited as loopholes.
Perhaps
the biggest cause for conflict exists in the requirement that
possessors of land will not be exempt, even if they do not own land
titles and therefore remain vulnerable to land-grabbing. If the
government expects people in this situation to pay taxes on property
then it surely has to address the major problem of land rights with far
greater urgency. It is surely unjust to tax people on land that can be
taken away so easily, and therefore this new tax category will only add
to housing insecurity in the category of people just above the
100-million riel threshold.
Still, this tax represents a major
step in the right direction that will generate much-needed funds for
urban development. The construction and property sectors, once fully
recovered, will be better regulated as a result.
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