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Sunday, August 20, 2006


Income tax free paradise?

It seems to be quite commonplace among Australians to do anything in their power to reduce their income tax. But have you ever considered what life would be like without it?

A few weeks ago I sat on the bus next to a man who is active in the Sam Rainsy Party, the opposition party in Cambodian politics. I might add that being active with this party is a commitment. Members sometimes find it necessary to leave the country to avoid prosecution on dubious charges.

We chatted about what is needed for Cambodia to develop. I said that I believed that Cambodia needed to gain independence from aid. My view is that a beggar will never think about the work s/he could do while they are able to live comfortably on the proceeds of their begging. At the macro level, a country that becomes used to balancing its budget with the help of aid from other countries will not start to think about how to raise money from within their own society. I asked my acquaintance if Cambodian people paid income tax.

The concept was entirely new to him.

He studies political science at university. He is politically active. And he had never heard of income tax.

I asked a few of my Cambodian friends what they understood by income tax. Most knew absolutely nothing about it. One told me that there is company tax but no income tax in Cambodia.

I can understand this. How much would you tax someone whose income was $50 per month or perhaps less? Many Cambodians live a subsistence lifestyle.

With very little money coming into the treasury from within the country, what sorts of services can the government offer its people?

Well, lets say that almost all services operate on an unofficial user pays system. If you need service from a government department you go and see the appropriate officer and they set a fee for what you want. The fee is determined by what they think you can afford to pay. It is not an official fee. It doesn't go into the government coffers. It goes into the officer's pocket. Some call it a bribe. Some call it corruption. Nearly everyone wants this system to end. But they never seem to think about where the money must come from to pay for the services otherwise.

These officials would not stay in the job if there was no opportunity to improve on the $50 a month the government pays them. Having a government job is simply a right to make money by charging for your services.

Yes, it is illegal but what can you do about it? Like to make a complaint? Just go and see the appropriate government official and pay them the appropriate fee—which is probably a little more than the one your complaining about.

I understand that this system extends to all government departments including the police and the justice system. People often say there is no point in going to court unless you can afford to pay the judge the appropriate fee. An article in a recent issue of the Phnom Penh Post says that if someone steals two cows you have more chance of having the thief apprehended if you offer the police officer one of the cows. The same article suggests that there are no rich people in jail. The people who are jailed are the ones who can't afford to pay for 'justice'.

So, what do you reckon? Like to come here and live in this tax-free paradise? Or do you prefer the system you've got?

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