VAT decree frozen after mutiny

Just one day after the Kingdom’s micro-lenders mutinied and said they would not implement a government directive requiring them to implement a 10% value-added tax (VAT) on fees for financial services, the General Department of Taxation (GDT) announced it would back down and temporarily suspend the controversial decree until it could conduct a study and address private sector concerns. The GDT said in the release yesterday that the implementation of the May 25 prakas (decree) that more clearly defines the government’s laws for nontaxable supplies concerning primary financial services would not be implemented “until further notice”. Bun Mony, an adviser for the Cambodia Microfinance Association, welcomed the GDT’s decision to suspend the implementation, saying microfinance institutions can now take time to properly prepare themselves for any future changes. Stephen Higgins, managing partner of investment and advisory firm Mekong Strategic Partners, said the GDT appeared to be taking a sensible move, adding that the measure was a bad idea to begin with. Higgins explained that implementing the decree would require banks and MFIs to invest a lot in IT necessary to properly process the VAT on fees. It would be better that this investment goes into things like digital financial services, which would help financial inclusion, improve customer service, and deliver a more efficient financial sector, he added. (Source: Phnom Penh Post)