Tshering Palden    

The Anti-Corruption Commission (ACC) yesterday cleared former minister Yeshey Zimba of any corruption in the fiscal incentives complaint the People’s Democratic Party government filed in January 2018.

“The commission did not find compelling evidence to pursue the case and decided to drop the case,” ACC stated in a press release.

The complaint came eight months and 10 months before the government’s dissolution and the elections respectively.

Commissioner Jamtsho said that there was no standard rules of procedure then. “So there was no guideline requiring the ministers to declare their conflict of interest and how to manage conflict of interest,” he said.

PDP government’s complaint

The commission received a complaint from the government on January 25 against former Works and Human Settlement Minister Yeshey Zimba. It was alleged that the former minister was fully involved in processing and approving the ‘revised list of Fiscal Incentives (FI) for Tourist Standard Hotels-April 2013’.

The incentives were approved in 156 session of the Cabinet, which the former minister had chaired in absence of the Prime Minister and its decision benefited most to his daughter’s entity called M/s Bhutan Hotels Pvt. Ltd (now Le Meridien) among 92 hotels. Therefore, the government alleged that there were ‘elements of policy corruption, abuse of official power and functions, failure to declare obvious conflict of interest and official misconducts’ involved in granting the above cited FI.

The commission assigned the complaint to an investigation team on July 31, 2019. Commissioner Jamtsho said that given the National Assembly elections in that year, the commission decided that it was best to delay the investigations.

ACC investigation findings

ACC officials said there was a trend of government giving fiscal incentives to the private sector, which began in 2002.

The revised fiscal incentives (FI) was initiated as per the government’s executive order on November 13, 2009. It was issued to frame policies for supply up-gradation with appropriate incentives for all tourist hotels to upgrade to at least three star.

Accordingly, policy was framed but tourist accommodation providers and hotel developers or  Hotel Association of Bhutan (HAB) were not satisfied with the policy and appealed to various agencies or committees involving different stakeholders wherein varying decisions and recommendations were exchanged.

A working group with members from different agencies was formed later to study the incentives for the hotel industry so as to rationalise, streamline and bring about a mechanism to support the growing tourism sector with adequate number of quality standard hotels. Upon completion, the working group submitted its report to the finance ministry.

Thereafter, the finance ministry forwarded the report to the revenue and customs department (DRC) for further study and comments along with the directives to analyse the revenue forgone by way of delivering incentives.

The department submitted the report to the finance ministry along with its recommendation. The ministry approved recommendations as per the Sales Tax, Customs and Excise Act, 2000 which empowers the ministry to exempt taxes in the public interest.

The entire content of the DRC report was presented to 156th Cabinet meeting on  April 2, 2013 by the finance secretary where Lyonpo Yeshey Zimba was present as one of the members. This Cabinet meeting had reconsidered the decision of the incentives for hotels and accordingly approved as recommended by the working group and later by the finance ministry. During the time, the Prime Minister was away in Bangkok on a private visit.

Similarly, the 157th Cabinet meeting on April 9, 2013 had also reconsidered the decision of the incentives for hotels and decided to approve as recommended by the working committee. This session was presided by the Prime Minister.

Commission’s decision

The ACC stated, “The revised incentives for tourist standard hotels – April 2013 had moved through various committees involving different stakeholders where former Lyonpo Yeshey Zimba’s involvement was not seen at any level while processing.” Therefore, it stated the allegation of former Lyonpo being fully involved in the processing of FI list remains unfounded.

The effective date of implementation and the end date or timing of the revised FI (from April 2013 to December 2015) was as per the recommendation of DRC, finance ministry based on the  Section 3.7.2 (a) sunset clause of Rules and Regulations FI 2010. “Thus, it was not perfectly designed for the benefit of hotels under active construction and readying to acquire those tax exempted items as alleged,” the ACC stated.

Former Lyonpo was involved in both the Cabinet sessions in approving the revised incentives list April-2013 but investigation did not find any alteration on the FI list submitted by the working group through finance ministry.

“There was a conflict of interest with former Lyonpo’s participation in the meeting but the decision was not on a particular hotel instead it was for the whole hotel industry,” the ACC concluded.

Further, it stated, the revised list of the incentives introduced in April 2013 was not a new incentive in entirety as it was part of FI Rules and Regulations 2010. “Therefore, former Lyonpo’s role in approving the revised FI was seen to have done as a Cabinet member.”

“Even if Lyonpo Yeshey Zimba had abstained from presiding the meeting on 156th lhengye zhungtshog on April 2, the eventual outcome of M/s Bhutan Hotel Pvt. Ltd (Le Meridien) benefiting from the policy itself could not have been different.”

ACC’s investigation also revealed that there was no established procedure whether or not to report the fiscal incentive agenda to the Parliament. The decision rested with the government of the day whether to put up to the Parliament or not.

The commission sensed an imminent risk of both perceived and actual risk of policy corruption unless transparent and preventive mechanisms are considered and put in place.

Commissioner Jamtsho said, “The Commission, therefore decided to formally write to the Prime Minister recommending the need to institute a system of declaring conflict of interest, if any in the Cabinet meetings.”