News

• 06 September, 2024
• Posted by: EuroCham Cambodia

This week, we interviewed Casey Barnett, founder and president of CamEd Business School and president of AmCham. Mr. Barnett is a longtime Cambodia resident and founded CamEd in 2000 as a training organisation for international companies and organisations. It has grown to become the premiere business school in Phnom Penh, and the only one recognised by the UK-Based Association of Chartered Certified Accountants (ACCA). In April, Mr. Barnett was elected as president of the American Chamber of Commerce in Cambodia, which is teaming up with EuroCham Cambodia for a joint tax forum on 18 September, 2024.

EuroCham: We’re delighted to team up with you for the Tax Forum this year. How will this collaboraton make the tax forum even better than our separate forums in years past?

Casey: I think it's going to be better because we will have pooled expertise, so we'll take the leading experts from both AmCham and EuroCham, and it will -- in terms of engaging the government – allow us to present to them a joint set of issues and concerns. This will be a more impactful method to communicate that these issues are serious, or that we need certainty in how the law will be applied or interpreted.

The US imports around 40 percent -- fluctuating between 37 to 40 percent -- of Cambodia's exports, and then together with the EU, it becomes more than 60 percent. So combined, we are Cambodia's biggest customer and it’s so important that we keep that relationship.

The concerns of EU business and American business really are the same as well. Our members both come from economies and jurisdictions where there is strict rule of law, a high degree of transparency, strict rules, and zero tolerance of corruption.  European and American companies are primarily importers of Cambodian goods, and so because we have similar businesses, come from similar economic and legal environments, and have similar concerns, it does make sense that we come together to engage the government.

EuroCham: What are the most pressing issues for businesses concerning taxes at the moment?

Casey: There are a variety of issues, and some are more pervasive than others. There are also issues where the taxpayer is in the wrong, and they are seeking leniency from the General Department of Taxation.

In some cases, the tax law is already clear but may be regarded by the business community as unfair or unreasonable. One example of that is goods given for free. Goods can often be given for free for marketing purposes, or other reasons, and it may be legitimate that there's no income received by the business that gave these products for free.

However, the tax law is very clear in that items given for free are counted as revenue. So even though it’s free, the fair price must be determined, and tax has to be paid on that, including a value-added tax and other taxes. It's going to increase your taxable profit.

So that's a case where the law is clear, but it's regarded by the business community as unfair. There are other issues where the law is not clear. Examples for that include the evidence required for a company to write off or expense for tax purposes a bad debt. The law allows bad debts to be recorded as an expense. However, what is not clear is the documentation required as evidence of that bad debt. In cases where the evidence for showing a bad debt is clear in the law, some of it may be unreasonable, such as a court decision.

Also, uncertainties in the law include something that's very disappointing, the treatment of share premium and additional paid-in capital and return to shareholders of additional paid-in capital. We have several members who have complained that when they contribute additional capital to their investment, some GDT officials have regarded this as a kind of income. Other cases have considered that if one shareholder contributes additional investment, they record it as a gain or income of the other shareholder -- another shareholder who might not have contributed. So, they're saying that shareholder is now benefiting from this additional injection of capital from the other shareholder and they tax that.

Some of these points we regard as not being clear in the law and being unsure, and then there are other points in the law that we believe are clear and are reasonable but they're not being implemented, or the law is not being applied in the way we believe it should be. An example of this is zero-interest loans.

Shareholders, instead of injecting additional capital, will often give a loan to their company, making it a related party loan. The purpose of that loan is just to give money to the company to make investments to purchase equipment, land, and assets.

The law is clear that related party loans can set any interest rate that the two parties agree to, as long as it doesn't exceed the market interest rate. So, our view, it's clear that any interest rate also would include zero percent interest. However, we have some members that complain that their use of zero-interest loans has been rejected by certain tax officials.

It's very concerning, the uncertainty regarding zero-interest loans, the uncertainty regarding additional paid-in capital, and the withdrawal of additional paid-in capital or share premium.

These are perhaps the most disappointing issues because they are slowing investors from bringing money in. If you have doubts, even slight doubts, that your capital might be subject to income tax, then you'd rather not bring that money in. Often business deals need to be done quickly. If they can't be resolved quickly, if there's no clear answer within several weeks or months, they may choose to invest their money in Vietnam or in Thailand. So, it's vital for Cambodia to relax its rules and be generous in its interpretation about bringing in capital and returning capital to investors.

EuroCham: I recently saw that some of your students at CamEd received top scores at the ACCA’s Foundations in Financial Management (FFM) and Foundations in Audit (FAU) examinations. Could you explain the significance of that, and how you design classes to ensure that students excel?

Casey: It’s important to have international standards for some things. An obvious example is weight, so the kilogram is the international measure for weight, and you can imagine the chaos of problems if the Cambodian kilogram was different than the European kilogram or something like that.

For business, accounting, and financial reporting, we also need metrics. We need to measure our assets and liabilities, but if we are measuring assets and liabilities in Cambodia different than other countries, it's also going to make it very difficult for investors.

It's going to cause some friction for investors trying to understand their financial performance or having trust in the financial performance as reported. So, in the early 2000s, the Cambodian government decided to adopt international financial reporting standards and international standards of auditing.

These two standards are going to be used around the world. However, in the early 2000s, there were no schools in Cambodia or universities teaching either of these standards, and this is where CamEd came in to play this role, and we introduced courses and classes teaching these standards.

We partnered with the Association of Certified Chartered Accountants (ACCA) of the UK. They're a global professional body, and they provide a qualification called Certified Chartered Accountant -- in the US, we would say CPA -- and the benefit of partnering with the ACCA is they set up examination centers around the world, and we were able to partner with them to establish an examination center here in Cambodia.

CamEd has been teaching ACCA for more than 20 years and we've continually invested in our teachers, our teaching methods, our materials, and our approach to preparing students for examinations. And recently we had a wonderful achievement where our students got number one in the world for two exams, foundations in financial management and foundations in auditing.

EuroCham: You’ve also been recently re-elected as AmCham president. Congratulations! How do you see America’s participation in the Cambodian economy changing in the short to mid-term future and how do you see your role in this scenario?

Casey: The Cambodian government has recently communicated its interest to attract US investment, and I have never seen such an interest and understanding of the important role of US business in Cambodia.

I think two things that are helping facilitate this engagement of US business and US investment is the Prime Minister, as well as the appointment of a new head of the Cambodian Council for Development, His Excellency Sun Chanthol, who has been communicating his interest to attract US investment.

In fact, AmCham will be joining the CDC at the end of this month on an investment promotion mission to the US, where they will be going to San Francisco, Los Angeles, Dallas, New York, and Washington, DC.

With the support of the US Embassy, the CDC has also agreed on an MoU to meet with AmCham and the US-ASEAN Business Council twice a year for the purpose of discussing, facilitating and resolving problems regarding investment into Cambodia.

This is a new arrangement. This never existed before. So, we have this new semi-annual meeting with the CDC and there is an interest to attract US companies that are currently in China to relocate production to Cambodia. China is facing increasing tariffs that will continue in the coming years, so to ship a production to Cambodia might be an option for some companies to avoid those tariffs.

At the same time, we, AmCham, and the US government, want to bring more US products to Cambodia. There are a lot of US products, especially agricultural products, that are high quality and haven't yet been brought to the market here.

So we think there's a lot of potential for bringing agricultural products and also agricultural equipment to help to provide a choice to Cambodian consumers and also to help increase productivity with US equipment.

Another sign that the Cambodian government is engaging with AmCham is the Prime Minister creating a private sector task force, including a sub-task force on tax and other issues. AmCham was also the first international chamber to be invited for a meeting at the Prime Minister’s office in the Peace Palace. I believe they previously met a Japanese delegation, but AmCham was the first association to receive an invitation. So, this shows an interest in reaching out to American business.

EuroCham: Cambodia has certainly become your second home. You are the only foreigner to pass the Khmer language tax agent exam and you regularly advise the government on tax issues.  When did you realise that this was the place you wanted to build your career, and your life?

Casey: I was initially attracted to Cambodia because of its history, the history of Angkor Wat, the art, and the sculptures of the country, and I think that one of the special things about Cambodia is it still has a very strong local culture. When you go into the countryside you have a very unique experience.

Being here as an American, and now doing business, I do find that there's a lot of economic freedom here. As a foreigner you can openly own 100% of your business. So other countries such as Vietnam or China, they may require a local partner, but in the case of Cambodia, no.

So, you can own 100% of your business, you don't need to share the fruits of your labor with others, it also makes decision making easy and you can achieve the degree of compliance and transparency that you need to.

Although there are complaints about uncertainties in regulation and taxes, in my experience the bureaucracy in Cambodia, the red tape in Cambodia, is much less than in Vietnam or other countries. So, we have less bureaucracy, we have economic freedom, generally less regulation, and you can own 100% of your business. Then you have very generous tax exemptions such as QIP, tax holidays, and the QIP tax holiday doesn't immediately turn off, it slowly raises the tax on profit over a period of several years after the QIP period has expired.

Also, something special about Cambodia is I've seen some surveys saying Cambodians are the most friendly people in the world. I would say Americans are very friendly too, we like to smile. We like to smile, we're generally down to earth, and that American culture really fits in well with Cambodian culture. So, you meet someone on the street, you smile, you say hello. Cambodia has that kind of culture, especially I'm from smalltown America, Montana, where you have a kind of, you have a, there's a friendliness and accessibility. People are willing to share their time with you.