Government Digs Into Tax Returns of NGOs, Cambodia Daily

by Hang Sokunthea and Ben Paviour | August 7, 2017

Prime Minister HE’s Cabinet recommended a new investigation into alleged unpaid payroll taxes at civil society organizations on Friday, according to notes from the meeting.

Later that evening, a letter addressed to The Cambodia Daily from the Finance Ministry’s tax department appeared on the hacked Facebook page of opposition lawmaker Ou Chanrith and, shortly thereafter, the government-affiliated Fresh News, claiming that the newspaper owed the government $6 million in back taxes and interest.

The Daily’s new owner, Deborah Krisher-Steele, confirmed on Sunday that she had received the letter and would respond in due time.

Council of Ministers spokesman Phay Siphan said Prime Minister HE had briefly raised the issue of unpaid NGO taxes during Friday’s Cabinet meeting—the first in seven weeks. Mr. Siphan denied any political motive for the planned investigation despite the fact that it seemed to exclude businesses, which he admitted sometimes dodge tax rules.

“A number of NGOs, they don’t pay taxes,” he said, adding that lawyers were also circumventing tax requirements. “Everyone making money in the country have to pay taxes.”

Meeting notes listed the planned audit of NGOs under “additional notes.”

Directed at the ministries of finance, foreign affairs and interior, the note asks the bodies to “check the implementation of law on salary tax toward workers/staffs of non profit-organization who are currently operating in the kingdom of Cambodia in order to reach transparency and equality.”

Local tax experts either could not be reached or asked not to be quoted on the record.

All Cambodian and foreign employees who make more than 1 million riel a month, or about $250, are liable to pay salary tax, according to the tax department’s website.

But some salaries are exempt from the tax, according to a 2015 booklet prepared by international professional services firm PricewaterhouseCoopers, including the salaries of lawmakers and senators as well as “certain employees of approved diplomatic, international and aid organizations.”

Run Saray, executive director of Legal Aid of Cambodia, said that in general, NGOs had to pay taxes on salary, though he was unsure why the issue was now earning attention from the Cabinet.

“There isn’t a specific reference to NGOs to pay salary tax, but in general all the entities have to pay tax,” he said, adding that his group also diligently paid its tax bills.

Sok Sam Oeun, a prominent lawyer and former head of the Cambodian Defenders Project, said that, prompted by donor requirements, the organization had been paying payroll taxes for “many years.”

The law was vague about the general tax requirements of NGOs, he said, but “if we say salary [tax], we should do it.”

Still, “I think many NGOs don’t,” he added.

The letter addressed to the Daily and signed by Heng

Narith, who is listed as the team leader of a group conducting audits on corporate tax obligations, claims the Daily is among the organizations that shirked its obligations.

From 2007 to last year, the Daily owes $2.4 million in unpaid taxes, almost $1 million in “additional tax,” and another $3 million in interest, the letter says.

It gives the Daily 30 days to accept or dispute the bill, with a lack of response taken as acceptance.

Reached on Sunday at her home in Tokyo, Ms. Krisher-Steele said she was still examining the 54-page document and would respond in due time.

“They’re asking us to pay more than we’ve ever earned,” she said.

Ms. Krisher-Steele wrote in an email that the Daily had started as a “non-profit project”—but not an NGO—by her father, Bernard Krisher, who in April sold its assets to Bernard Krisher Jimusho Co. Ltd., a Cambodian company she established and whose name is listed on the letter.

“I was surprised to see the letter from the tax department posted on social media before my own copy reached me and be given a chance to respond,” she added.

Mr. Chanrith, meanwhile, said he had lost control of the Facebook account that published the letter when it was hacked in April, during a period in which a number of opposition politicians had similar experiences.

Friday’s post was the first by the hacker, he said.

Billy Chia-Lung Tai, a human rights and legal consultant previously based in Phnom Penh, said that he knew of few NGOs that paid payroll taxes unless they had been prompted by their donors.

It was “very difficult to stay objective and non-cynical about the Cambodian government sending The Cambodia Daily a tax bill of $6 million when they have shown no interest in collecting such tax in the past,” he added.

“I am sure they have (or should have) bigger priorities,” he wrote in an email. “Of course, there is nothing inherently wrong with demanding back tax that is legitimately owed.”

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