Government in Phnom Penh has targeted independent media in recent weeks, forcing several to close.
Rights activists also point to a broad strategy by the government against both the media and rights activists.
U.S. officials, including veteran Senator John McCain, have also called on the Trump administration to take action against Hun Sen’s government over the crackdown.
The U.S., and press freedom and human rights groups, strongly criticize Cambodia’s decision to shutdown and pressure civil society and media.
U.S. Senator John McCain, chairman of the Senate Armed Services Committee, said in a statement that he was “concerned and disappointed” by the decision to close the NDI.
The announcement on Wednesday comes amid a broad crackdown on non-governmental groups and critical media outlets ahead of a crucial general election next year, rights groups have said.
The paper was handed a $6 million tax bill earlier this month and given until September 4 to pay or face closure, the seizure of its assets and suspension of its license to operate.
A State Department spokesperson said Washington was in talks with the government in the hope it would approach the disputes “in a fair fashion”.
The Cambodia Daily told VOA Khmer in an email that the tax bill was not based on an audit of the company’s accounts and was politically motivated.
The move further limits opportunities for political activity and expression ahead of next year's general election.
Human rights observers, however, say that while Hun Sen’s more than 30-year grip on Cambodia may seem unshakable, his rule cannot last forever.
Many took to social media following the announcement to suggest that the move was a pre-election strategy on the part of Hun Sen to win votes and boost his popularity.