Gov’t to give tax break to subsidise garment wage

THE government will offer garment manufacturers hefty tax breaks – incurring losses of more than $40 million in government revenue – to subsidise the increase to the sector’s minimum wage, Prime Minister Hun Sen told workers yesterday, though some observers said the move was imprudent.

In a Facebook post yesterday, the premier – who has been engaged in a charm offensive to court the country’s 700,000 garment workers – said he had told garment workers he tried “so hard to help you nieces, and the government needs to prepare $40 million to support the companies to increase the salaries of workers”, adding that the new minimum wage of $170 a month would take effect in 42 days.

According to a new government policy, made public last month, the government will reduce export fees and continue to postpone the collection of a profit tax for garment and footwear companies.

Ministry of Labour spokesman Heng Sour said the move served to alleviate the effects of the increased minimum wage on the employer.

“The ministry already issued the notification on cutting taxes, and the prime minister mentioned this morning that the government will cut the export management fee, equalling $24 million per year, and the [renewed] postponement of the 1 percent advanced profit tax, equalling $20 million,” he said.

The government had suspended the percent advanced profit tax in 2009 and has postponed it since.

But Preap Kol, director of Transparency International, said that while the increase in wages was itself a good thing, it had to be financed differently. “It makes the government lose the tax income . . . and employers don’t even pay more,” he said.

With this move, he said, the government was losing crucial income needed to cover other expenses at a critical time.

“The US and EU announce that they [might] deduct the funds for next year and impose sanctions or something, [so] the government needs to find other budget or funds to replace it,” he said.

This assessment was echoed by San Chey, executive director for the Affiliated Network for Social Accountability.

“Some foreign countries might cut funding next year, so the government needs to be careful about expenses and has to save more. It should manage the national budget income carefully, and should not cut the tax collection this way,” he said, adding that both workers and the government would benefit from more thorough consideration of government revenues.