Paying Unofficial Taxes In Cambodia

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By Kyle James for B2B Cambodia

For years, paying unofficial “facilitation” fees to ministries in return for services such as getting licenses has simply been a part of doing business in Cambodia, like in many developing nations.

A few dollars handed over to a civil servant or a police officer could mean the difference between waiting a few days for that all-important document and coming up against “irregularities”.

Especially with SMEs, the amounts in general aren’t very large, business owners who have paid them say, and they haven’t been a financial burden.

“It’s hard to deny that unofficial payments still affect the business community,” says Sheila Scopis, of EuroCham, who still refers some international companies entering the local market to legal firms to discuss how to get around the issue. “But we also see some gradual improvement.”

As part of its anti-corruption drive, the government has published a list of fees that business pay to authorities for various services covering payments made to the Finance Ministry’s customs and taxation departments as well as others charged by the Ministry of Commerce.

Another list lays out fees required by the Council for the Development of Cambodia (CDC).

The lists also indicate how long it should take for service delivery and the rules mandate that applicants get payment receipts.

“It’s a positive thing and shows the Cambodian government is trying to get up to speed with the issue,” says Abigail Gilbert, of BritCham. “Anyone setting up a business can see what ought to be happening when they go to a ministry.”

However, there are questions about implementation. Some worry that civil servants might provide a receipt for the official payment but ask for an informal fee on the side.

Still, the lists provide some ease of mind for foreign investors, many of whom were spooked when Cambodia’s criminal code put in place harsh penalties on facilitation fees, including jail terms.

Because the fees were illegal in Cambodia, anti-corruption laws in the US, the UK and elsewhere meant nationals from those countries could face legal trouble at home for paying the fees. Doing business got riskier.

But the new steps toward more transparency have borne fruit, business owners and associations say.

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