Airports fear paying millions in land tax annually

The establishment of thromdes could see the higher urban land tax being charged

Tax: The Department of Air Transport (DAT) will be proposing to the government that airport land be exempted from urban taxes as this could lead to exorbitant amounts and airline passengers eventually bearing the brunt.

The department raised its concerns at the information and communications ministry’s midterm review last month, that once the dzongkhag thromdes are established, Paro international airport and the domestic airports may have to pay an urban land tax. Currently, the department only pays a rural land tax.

If an urban tax has to be paid, the total amount would increase significantly if a commercial urban land tax also becomes applicable.

DAT director Karma Wangchuk said that the tax would be especially high for the Paro and Gelephu airports.

In the case of Paro airport, which currently has around 165 acres, the department would be paying a rural tax of around Nu 2,000 per year, excluding taxes on structures. The rural tax is Nu 12 per acre.

But if Paro airport falls under Paro thromde, it could be paying a commercial land tax of around Nu 3.6M annually.

The urban land tax is Nu 0.50 per square foot for commercial land, which translates to Nu 218 per decimal (436 sq ft). An acre (43,560 sq ft) would then cost Nu 21,800.

The total amount of land at Paro is also expected to be higher with land recently being reclaimed from the Pachhu.

Even if only half of its land falls under a new thromde, the figure would still be high at around Nu 1.8M.

Gelephu airport has around 518 acres but an additional 200 acres is expected to be added for future expansion plans. Bumthang’s airport is made up of around 118 acres, while Trashigang’s airport has 95 acres. Land reclamation at the Yonphula airport in Trashigang is also ongoing so the figure could change.

With all the airports combined, DAT could end up spending millions on land tax annually.

“We own a lot of land and now if we’re taxed as high as the urban (rate), then we’re going to get killed,” Karma Wangchuk said.

The director added that the tax will eventually be passed onto the airlines, which would in turn pass the burden to passengers.

“Airport land should be treated different,” Karma Wangchuk said. He pointed out that only a fourth of the total land is used for the terminal, runway, and car park, among others. Remaining land is required to meet safety standards.

He explained that international practice is for airports to be corporatized or privatized and that while the long term plan is for Bhutanese airports to be corporatized as well, the department has to compete with other agencies for a limited budget annually. He said that high taxes could eat into other areas of expenditure like security and safety.

During the midterm review, Prime Minister Tshering Tobgay directed the information and communications ministry to submit a proposal and recommendations on the issue to the finance ministry. Lyonchoen said both the ministries should work out the issue and make a decision together.

Gyalsten K Dorji

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