A Change of Guard

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Sunday 2 June 2013

Increasing Government Revenue: An Important Step Towards Self-Sufficiency


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By William E. Todd, U.S. Ambassador to the Kingdom of Cambodia 

Thanks to this column’s incredible readership, we have been able to explore some issues that are very timely and relevant to Cambodia.  The questions and comments have been excellent, and I see that no one has held back.  Please continue sending your questions – even your toughest ones – to me at AskAMBToddPP@state.gov.

Each year, foreign donors provide assistance and development aid to Cambodia that is equivalent to more than half of the country’s annual budget.  The United States alone provided about $76 million for economic, health, education, environmental, and democratic development assistance in Cambodia in 2012.  While noting the critical role played by foreign countries, a recent reader of my column asked, “How can Cambodia become less dependent on foreign assistance?” 

The simple answer is that the Cambodian government needs to generate more revenue.  One way to accomplish that is through improvements to the tax collection system.  Although most people do not like paying taxes, an efficient tax collection system is indispensible to the functioning of any modern government.  Taxes pay for nearly every service that a government provides, including building roads, providing an education to children, and ensuring the safety of citizens.  As former U.S. President James Madison said, “The power of taxing people and their property is essential to the very existence of government.”

While the United States remains committed to helping Cambodia, I can assure you that our long-term goal is to help the country “graduate” from foreign assistance, transforming from a recipient of aid to a provider of assistance.  As a leader in the health arena, Cambodia deserves tremendous credit for significantly improving the health of its people.  Recognizing this success, the U.S. government is beginning to shift its assistance from service delivery to technical assistance.  As Cambodia strives to become a middle class society, it must be prepared to assume greater financial responsibility and face the likelihood of no longer depending on foreign assistance.


I am happy to note that Cambodia has already started this transition by contributing troops to a number of international peacekeeping missions, including the UN missions in Lebanon, Sudan, South Sudan, the Central African Republic, and Chad.  Cambodians on these missions are performing critical work on projects related to demining, road and bridge construction, and medical treatment for civilians.

For Cambodia to continue making progress in transitioning away from a dependence on foreign assistance, however, the country must boost its government revenue.  To support this effort, the U.S. Treasury Department has been working closely with Cambodia’s General Department of Taxation to help it develop a four-year strategic plan for improving internal management and accountability in collecting government revenue.  U.S. technical assistance is also helping Cambodia’s taxation department to audit companies more accurately, increase collection of taxes in arrears, publish information for taxpayers, better manage human resources, improve strategic and operational planning, and increase employee awareness of organizational ethics and integrity.

As a result of these efforts and the General Department of Taxation’s strong leadership, Cambodia has made substantial progress over the past year.  In 2012, the department substantially increased internal tax collection compared with 2011.  This remarkable achievement bodes well for Cambodia’s ability to graduate from a reliance on foreign assistance to a more independent, sustainable position.

It is important to remember, however, that the need for increased government revenue does not necessarily justify increasing rates or creating new taxes.  High taxes can discourage investment, fuel black markets, lead to capital flight, and ultimately mean less revenue for the government.  These factors demonstrate the importance of getting the right balance in tax rates and how focusing on improving revenue collection under current tax schemes can be preferable to creating new taxes or increasing rates.

I understand, of course, that taxes reduce the amount of money available for basic necessities like food, education, and shelter.    We work hard to put food on the table, save for our children’s education, and provide for our families.  Tax revenue, however, allows the government to pay teachers’ salaries, build and maintain infrastructure, and keep us safe.  Government revenue paves the way toward self-sufficiency.  As former U.S. President Franklin Roosevelt once said, “Taxes…are the dues that we pay for the privileges of membership in an organized society.”

As always, thank you for the feedback to my “Ask the Ambassador” column.  One of the best ways for me to learn more about the issues facing Cambodia is by listening to your interesting and thoughtful questions.  I hope to continue to hear from you at AskAMBToddPP@state.gov.

William E. Todd is U.S. Ambassador to the Kingdom of Cambodia

3 comments:

Anonymous said...

No word " CORRUPTION " was mentioned ? is Todd
afraid of Hun Sen Volunteer Youth ?

Anonymous said...

China #1 for Cambodia.

Anonymous said...

I have to agree with the U.S. Ambassador William E. Todd. Taxation is very important for the government services. As a good citizen we should pay taxes and commit no crime. However, I always have problem on how the government spends the money that generate from these taxes. The bigger the government, the more taxes we have to pay and most of the governments are often not doing a good job when they are trying to parenting the society. Most of the policies the governments made are base on their political and their individual interests, not necessary benefit the country as whole. I believe in a smaller government and a more affective government and at the same time I also believe in liberty in which government should not impose any rule of laws that would taking a way individual freedom. Cambodia is far from that of the government.