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Opinion: Capital Gains Tax Is a Smart Way to Build Infrastructure
- Mar 22
- 5 min read
By Nith Kosal
IPF
Future Forum's research fellow Nith Kosal was published in Cambodianess on March 22nd, 2026. Check out the original article HERE, and read it below!
The government plans to introduce a new capital gains tax in January 2027 after a postponement of three years.
This new tax system aims to promote a long-term fiscal reform agenda that contributes to sustainable revenue growth and ensures fairness between salaried income earners and investors who benefit from asset appreciation.
This new tax should be updated to be more comprehensive and progressive, serving not only to generate additional national revenue but also to promote better social welfare.
Its implementation will cover six asset categories simultaneously: real estate, leases, investment assets, business goodwill, intellectual property, and foreign currency.
The government plans to apply a 20 percent tax on the profit earned from the sale or disposal of these six asset categories. For example, if someone bought an apartment in 2020 and sells it in April 2026 for a $20,000 profit, they would pay $4,000 in capital gains tax.
The government provides exemptions for certain categories. These include agricultural land used for production, a principal residence held for at least five years, assets transferred within a family through inheritance or first-time donation, property owned by public institutions or used for public benefit, issuance of new shares for capital increase in new investments, and non-resident shareholders.
These exemptions are designed to reduce the financial burden on certain groups.
But a 20 percent tax across all six asset categories will surely create financial constraints for people, especially low-income households. Therefore, successful implementation requires certain considerations and adjustments to ensure that this new tax contributes to promoting social welfare and investment.
A threshold for exemptions may be necessary, particularly in real estate. For instance, if capital gains are below $10,000, no tax should be levied.
Applying the tax on such modest profits could prevent people from reinvesting in a new property and place undue financial pressure on low and middle-income households. This is especially true for some households or new couples who sell assets to fund their children’s education, start a business, or purchase a home near their workplace.
We also need to think about inflation, the general increase in the prices of goods over time, which reduces the value of money. Suppose someone bought a piece of land for $20,000 in 2008; the same land might now cost $100,000 because of increases in land prices and construction prices. Applying a 20 percent capital gains tax on such a gain could impose a heavy burden on ordinary people.
The tax rate should also consider the holding period of assets. Short-term gains from assets held less than a year could be taxed progressively from 10 percent to 30 percent, while long-term gains from assets held over a year could be taxed at 10 percent, 15 percent or 20 percent, depending on the profit.
For example, a 10 percent tax could apply to capital gains between $10,000 and $30,000.
This approach is important to encourage long-term investment and discourage short-term speculation. Higher rates on short-term gains help reduce volatility, while lower rates on long-term gains support capital formation and fairer taxation. This structure helps to balance revenue needs with incentives for stable and productive investment.
The rate could also consider a household’s income for example, a family earning $3,000 annually would pay nothing if they sold land for a $10,000 profit for the first or second time.
This approach helps households build economic resilience before taking on the responsibility of paying taxes. Conversely, a household earning $10,000 annually and then with a $10,000 profit from selling land would be liable for a 10 percent capital gains tax.
However, they could apply for an exemption if they face financial hardship by providing supporting documents for the authorities to evaluate.
The government needs to determine through empirical study the income level for households or individuals that would qualify for a capital gains tax exemption.
When it comes to other assets, such as goodwill, intellectual property, and leases, Cambodia faces significant policy challenges. Implementing effective taxation will require the General Department of Taxation to work closely with banks and the private sector, and to establish a centralized data-sharing system across all government institutions.
First, they must create an asset registry database. Then, a well-trained monitoring and assessment team that works to monitor and evaluate taxes accurately, taking into account costs and market asset values.
For example, if a software developer spends six months creating software and sells it to a local company for $20,000, tax calculations must consider the total development cost, including labor (based on market rates for similarly experienced developers), service charges, and other production costs. While complex, such a system would ensure the taxation process is fair.
The proposed capital gains tax is more complex than the government’s policy, with multiple conditions and exceptions. Yet, it is suggested to be comprehensive, supporting social welfare while encouraging people to feel positive about paying it. Effective implementation will require a strong system of record-keeping and evaluation to ensure efficient tax collection.
The government has not specified how it plans to allocate the revenue from the capital gains tax. I propose using it for infrastructure because infrastructure is universally important, facilitating better movement and strengthening logistics in support of a wide range of activities.
Every day, citizens and investors experience the quality of public infrastructure. In Phnom Penh, for example, minor roads are often built without proper planning for drainage systems.
Later, when funds become available to install underground sewers, excavation damages the roads. And then there is often no money left to repair the roads afterwards, which creates traffic congestion and frustration among road users.
Also, research shows that transport and logistics costs for businesses in Cambodia are much higher than in its peer neighbor countries.
In 2023, Cambodia’s logistics costs represented 26 percent of its GDP, significantly higher than Thailand’s 14 percent and Vietnam’s 20 percent. The World Bank suggests that improvement in infrastructure is a major step to building sustainable economic growth in Cambodia.
Capital gains tax could give Cambodia the funds to install underground sewers in Phnom Penh and fix its roads, as well as to build an advanced infrastructure system, making the everyday movement of people and goods smoother and more efficient.
Cambodia should focus on building and maintaining high-quality road infrastructure. At the same time, the country should develop attractive and well-designed public transport spaces, such as bus stops with greenery and tree-lined streets that promote walking.
Cambodia should also focus on developing a rail system and promoting sustainable transportation options like cycling and electric vehicles.
This opportunity to invest in Cambodia’s public goods ultimately rests on the successful and fair implementation of the capital gains tax. People and investors are happier when the tax system is fair and does not add an unjust financial burden, especially since many see selling or receiving assets as a chance to improve their living standards or invest in their households.
The capital gains tax system should be carefully considered and implemented, with many exemptions and varying tax rates for specific groups, to uphold a high standard of equity and successfully finance public goods.
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