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Opinion: Simplified Tax for Gender-Inclusive SME Research and Development
- Mar 31
- 5 min read
Junior Research Fellow
Future Forum's junior research fellow, Vandeth Ngoun was published in The Cambodianess on March 31st, 2026. Check out the original article HERE, and read it below!
Cambodia has the ambitious goal of becoming an upper-middle-income country by 2030 and a high-income nation by 2050. However, getting there necessitates a structural shift toward a knowledge-based economy driven by scientific and technological advancements.
A knowledge-based economy is an economic model defined by a structural transformation away from manual, labor-intensive activities toward those driven by scientific and technological capabilities and specialized expertise.
In this system, research and development (R&D) provides the vital scientific foundation necessary for creating innovative products, improving productivity and addressing modern societal challenges.
For example, while a traditional economy might focus on mass-producing physical goods through manual labor, a knowledge-based economy thrives on high-value sectors such as artificial intelligence, semiconductor design, and cloud-based services, where the primary source of wealth is the intellectual "know-how" of the workforce.
This shift is essential for diversifying the economy and building a more resilient, innovation-led society that can compete effectively on the global stage.
While the existing Law on investment, Chapter 6, provides generous incentives for R&D through the Qualified Investment Project (QIP) status, these requirements are frequently too demanding and strict for small and medium-sized enterprises (SMEs) and firms adhering to the least formal registration mandates. Therefore, this policy commentary proposes establishing targeted, simplified R&D tax incentives for SMEs, explicitly focusing on encouraging female participation in science, technology, engineering, and mathematics (STEM) fields, thereby leveraging the tax system to address both economic diversification and persistent gender gaps in innovation.
Policy Issue and Empirical Evidence
Cambodia is actively promoting innovation and R&D as a key part of its National Science, Technology, and Innovation (STI) Roadmap 2030 and broader national strategies. The current system allows R&D-focused industries to claim a 200 percent deduction on certain research, development, and innovation expenses, provided they register as a QIP.
However, for most businesses, especially smaller firms often classified as small taxpayers under simplified accounting rules, the strict formal requirements of the QIP status act as a significant obstacle to accessing specific R&D support.
Based on the UNDP Cambodia Gender Equality Strategy (2025–2029), this issue is crucial for women entrepreneurs who own 62 percent of microenterprises and 26 percent of SMEs, many of which operate informally or lack the capacity for complex registration procedures.
Additionally, tackling the severe gender gap in the technology sector is crucial for national success. Women are considerably underrepresented in the information and communication technology (ICT) sector, making up only about 10 percent of the workforce, and just 8.4 percent of female students graduate from ICT programs — a rate three times lower than the global average.
This underrepresentation is worsened by cultural norms that view technology as a male-dominated field. Not providing R&D incentives tailored to the SME segment means missing out on the innovative and economic potential of half the population, as increasing female participation is vital not only for equality but also for innovation and economic growth.
Key Arguments and Implementation Process
To effectively encourage R&D activity among SMEs and promote gender inclusivity without the high registration requirements of the QIP framework, the tax administration should introduce non-discretionary, cost-based incentives focused on R&D inputs for SMEs, broadly defined as small and medium taxpayers.
These incentives should be structured as enhanced allowable deductions built on the existing concept of deducting necessary business expenses. Specifically, the Ministry of Economy and Finance, likely through an administrative order (prakas), should define and make accessible a super-deduction (e.g., 150 percent deduction) for specific R&D inputs to all registered small and medium taxpayers.
The most impactful expenses to target are those directly related to human capital development and intangible assets in R&D roles, addressing the challenge of recruiting women into STEM.
Qualifying R&D expenses eligible for this enhanced deduction should explicitly include salaries paid to staff engaged in R&D roles, costs to obtain and amortise intangible assets like patents and copyrights, and vocational training and skills development focused on digital or technical expertise provided to Cambodian employees.
The current QIP framework already employs a similar approach, enabling a 150 percent deduction for human resource development through vocational training and skills, which supports this as a powerful incentive.
For implementation, the administration should introduce additional gender-responsive criteria to strengthen the incentive.
For example, an extra deduction benefit could be granted if the firm's R&D personnel meet a minimum threshold of female employees in technical or leadership roles, thus directly supporting the government's policy goals of encouraging women in STEM.
The GDT must establish simplified accounting and clear documentation rules for these smaller entities to claim the deduction, reducing compliance difficulty, especially for small taxpayers who typically use simplified accounting rules. By providing accessible, input-based tax relief, Cambodia can incentivize emerging R&D activities within the SME sector while actively supporting gender diversity in its transition towards a technology and innovation-driven economy.
Counterargument and Cost
A significant counterargument to expanding R&D tax incentives beyond the strict QIP framework to SMEs is the potential for tax revenue erosion and increased administrative complexity. Tax incentives, if poorly designed, may incur substantial forgone revenue while generating minimal behavioral change or "low bang for buck."
Extending complex provisions, such as enhanced deductions, to small taxpayers who benefit from simplified accounting rules inevitably increases the burden on revenue administration in monitoring and preventing the evasion or misinterpretation of qualifying expenditures.
Although Cambodia is projected to see minimal net revenue effects under international tax reforms focused on destination-based taxation, any domestic tax loss must be carefully justified.
However, the cost of forgone tax revenue is a necessary investment to accelerate the nation’s structural transformation to a knowledge-based economy. R&D tax incentives, particularly those that are cost-based rather than profit-based, are widely proven to be effective in stimulating firm innovation and generating positive societal spillovers.
Furthermore, by explicitly linking the tax incentive to gender inclusion criteria, the policy directly targets a significant barrier to Cambodia’s long-term economic prosperity: the underuse of women's talent in technical sectors.
This targeted expenditure ensures that fiscal policy serves dual purposes — stimulating innovation and promoting gender equality — thereby generating resilient and equitable economic growth.
Opinion
The creation of a vibrant, innovation-led economy demands that Cambodia fully mobilises all its resources, especially the underrepresented talent of women in technology and R&D. By transitioning R&D tax incentives from the exclusivity of the QIP regime to an accessible, gender-responsive mechanism for SMEs, the Royal Government of Cambodia can provide crucial institutional encouragement and financial support, ensuring that economic modernization is intrinsically linked with the advancement of equality for people of all genders.
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