CIT grows by touch too small

Revenue:The combined corporate income tax (CIT) of 10 state-owned enterprises (SOEs), excluding the Druk Holding and Investment (DHI) companies, have grown by about 2 percent on an average annually since 2008.

In 2007, total contribution from CIT of the 10 SOEs was Nu 24.2 million that grew to Nu 98 million last year.

Revenue from the CIT of the SOEs peaked in 2012 with Nu 102 million. It declined to Nu 91 million in 2013, however.

Army Welfare Project is the major CIT contributor of the SOEs accounting for more than 63 percent of the total CIT contribution from the SOEs.

A representative from the private sector said that this is bound to happen when government tries to do business. “It is a global phenomenon, and SOEs around the globe has failed,” he added.

However, a government official said that most of the SOEs have social mandate and profit not a priority. But remittance of dividends from these SOE has formed quite a chunk of the domestic revenue.

Government grants and subsidies are provided to SOEs as a compensation to cover the cost incurred or revenue foregone while executing social obligations.

As per the budget report of 2015-16, total transfer and subsidy is estimated to roughly Nu 2.1 billion, which is 35% higher from the past fiscal year.

While some SOEs received corporate tax exemptions, some were given interest subsidy on loan, and government provided the operation cost in some cases.

DHI companies, including the DHI-owned, linked and controlled, contributed a CIT of about Nu 33 billion in eight seven years from 2007 to 2014.

The 10 SOEs contributed about Nu 505 million in the same period.

Bhutan Power Corporation and Druk Green Power Corporation are the major contributors in DHI’s case.

A representative from private sector also pointed similar sluggish growth in CIT from the whole DHI companies despite huge amount in absolute terms.

The average annual growth in CIT of the DHI- owned, linked and controlled companies comes around 3 percent, in the past five years.

Tshering Dorji

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