Dorji Choden

While the tax breaks and benefits have reportedly supported economic growth and job creation, a report on business regulatory processes highlights that businesses are struggling to still fully take advantage of these incentives due to complicated processes and other challenges. 

The Fiscal Incentives Act of Bhutan 2021 was introduced to help businesses recover from the impact of Covid-19.

The review by the Ministry of Industry, Commerce, and Employment points out several issues. 

There are concerns that fiscal incentives may not be fair or equitable, as they could unfairly favour specific industries or businesses over others.

Businesses say that the rules are confusing as many businesses find it hard to understand the policies, making it difficult to claim the benefits.

Many think fiscal incentives are illogical as they hinder growth, are inefficient, discourage investment, and prevent the public from taking economic opportunities.

According to the report, there is unfair distribution where some industries, such as tourism. The travel agencies, for example, can only get one vehicle quota no matter how many tourists they bring in. 

While the incentives aim to help businesses, they also cost the government, particularly if they lead to lower tax revenue and higher government spending.

Going by the various voices, It appears that some rules under the Economic Development Policy and the Foreign Direct Investment Policy contradict each other, creating confusion for the public.   

The report presented policy recommendations to the government such as the need to simplify regulations and provide clear guidance for businesses to apply for incentives easier.

It also recommends regularly reviewing programmes to ensure they benefit a diverse range of businesses and are awarded based on merit and contribution to national development.

The report recommends conducting thorough cost-benefit analyses, exploring alternative funding sources to offset potential revenue losses, implement robust monitoring and evaluation to assess programme impact, and using data to refine them for maximum benefit.

It highlights the need to foster strong coordination among government agencies, businesses, and stakeholders to ensure alignment with broader economic development goals.

Call for transparency

With a push for clearer information and stronger mechanisms for public oversight, many demand transparency  in the system. Businesses also are for providing training and support to businesses, especially small and medium-sized enterprises to effectively utilise available incentives.

The Fiscal Incentives Act of Bhutan was passed in 2017 and amended in 2021, offers tax holidays, rebates, and exemptions for businesses to encourage private sector growth, attract investments, and create jobs.

For instance, newly established businesses only pay five percent Business Income Tax, while the established ones pay 15 percent in five years.

Rural businesses get full tax exemptions. These benefits will last until the end of 2026.

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