Cambodia offers tax breaks to factories hit by coronavirus, EU tariff losses

Cambodian Prime Minister Hun Sen on February 24 promised to give tax breaks to garment factories hit by supply chain disruptions from the coronavirus epidemic and higher tariffs after the EU withdrew trade preferences.

25, Feb. 2020

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PHNOM PENH, VNA – Cambodian Prime Minister Hun Sen on February 24 promised to give tax breaks to garment factories hit by supply chain disruptions from the coronavirus epidemic and higher tariffs after the EU withdrew trade preferences.

Travel restrictions and quarantines in China, the manufacturing engine that powers much of the world, hit movement of goods, with the lack of supplies reverberating throughout the global supply chain.

The disruption is hitting as Cambodia’s key garment industry prepares for the loss of about 20 percent of the trade preferences it enjoys under the “Everything But Arms” (EBA) scheme the EU offers 48 of the world’s poorest countries. The percentage equates to about 1.1 billion USD of exports.

The European Commission will place zero duties with standard tariffs for certain garments and footwear, all travel goods and sugar. The standard tariff for clothing is 12 percent.

Cambodia’s total exports to the EU in 2018 reached 5.9 billion USD, more than double the 2013 level.

To that end, Cambodian Prime Minister Hun Sen said any factories that are strongly affected by the coronavirus or EBA tariffs will be exempt from tax for at least six months.

The government would help pay partial wages to workers if production is halted.

When the factories suspend operations, they will pay 40 percent of the current minimum wage to their workers, while the government will pay workers an additional 20 percent. Therefore, in total, workers will get 60 percent of their current wage.

Besides, the PM also pledged to give hotels and guesthouses a tax exemption for four months to help offset losses to the tourism sector caused by the virus strain. - VNA