The Effects of Fiscal Policy in Taxation Constraint Using the CGE Model : The Case Study of Cambodia

This paper will try to find the effects of fiscal policy of Government in taxation constraint in Cambodia by using the econometric model as CGE model. In addition, this compiled to broaden more the crossectional effects due to dimensions of Cambodia's economy with the main variables. By this simulation results, I have seen that government revenue is very high compared to other tax rate level in 5% of income tax rate per annum in order to get more revenue and this mentioned that most of the Cambodian labor has revenue around $125-$300 per month which is $4.06-$10 per day. Whereas poverty headcount ratio at $3.10 a day and corresponding $1.25 a day and $2 a day poverty lines (Worldbank, 2011). Due to this result, "effective tariff rates” is far below the official rates in figure 8. In addition due to above simulations mentioned that HHD annual income mostly levels in 5% scale salary as mentioned in figure 3.1. The Cambodia government should take immediate measures to respond to the effects of the fiscal policy in tax collection efficiency. However, it is important due to prevalence of smuggling and inefficiencies in tax collections. As a result, the estimated “effective tariff rates” is far below the official rates. It seems to be broad although it is difficult while income tax (Ytax) consists about 10,005.26 million dollars and government transfer equaled 45 million dollars, too, furthermore, consumption expenditures are covered around 41,154.95 million dollars in 2004.However, in 2015, Cambodia's General Department of Taxation (GDT) collected $1.09 billion in taxes during the first 10 months in 2015, up 23.9% with to the same period a year earlier. This growth was increased tax revenue on vehicles, which heightened 116% during the period, while taxes collected on tobacco grew 114.9 per cent. This means that the $1.09 billion tax revenue collected so far this year represents 93.7 per cent of 2015's annual tax revenue (GDT, 2015)