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The Parliament’s recent decision to endorse the Fiscal Incentives 2017 as a money bill has raked up several ambiguities for the government.

At the post-session press conference on June 20, the National Council’s spokesperson and deputy chairperson, Tshering Dorji, said the government should collect taxes that were forgone without the Parliament’s approval. Most beneficiaries of the tax holidays are private businesses.

Tshering Dorji said the Council is confident that the government will not come up with excuses to not collect the taxes. “It is the responsibility of any government to get back the taxes that were granted without following the law,” the spokesperson said.

Article 14(1) of the Constitution states, “Taxes, fees and other forms of levies shall not be imposed or altered except by law.”

According to the Supreme Court verdict on the first constitutional case, it is not only the tax incentives that the present government granted that should be collected. The government should also collect taxes that the former government gave from 2013 to the December 31, 2015.

This is because the former government granted fiscal incentives in 2013without the Parliament’s approval although the Supreme Court verdict in 2011, had ruled that fiscal incentives should be passed through parliament.

The present government gave continuity to the same fiscal incentives from January 1, 2016 to May 8, 2017. The government argues that it did not feel the need to pass them through the Parliament, since the former government had not done so.

The value of tax incentives granted by the two governments is expected to run into billions of Ngultrums.

During the recent parliament session, Speaker Jigme Zangpo said the Supreme Court would provide a directive for resolving the issues sorrounding the fiscal incentives. However, the Speaker told Kuensel yesterday “There is no ambiguity as the fiscal incentives have been passed as a money bill.”

Chairperson of Assembly’s legislative committee, Ritu Raj Chhetri, said the Assembly couldn’t seek the judiciary’s interpretation on constitutional matters. He said the responsibility to recover the taxes falls on the government.

“The Parliament has streamlined the procedure for passing fiscal incentives. The ball is now in the executive’s court,” he said.

The Fiscal Incentives 2016 was renamed as Fiscal Incentives Bill 2017 after the Assembly agreed to treat fiscal incentives as a money bill. Accordingly, the fiscal incentives will be effective retrospectively from May 8, 2017 the date the bill was introduced in the House.

This makes the fiscal incentives granted before May 8, 2017 and after the Supreme Court verdict unconstitutional and may have to be recollected.

Bhutan Chamber of Commerce and Industry (BCCI) president Phub Zam said fiscal incentives benefit everyone, especially the private sector and are necessary for economic development.

“The private sector is not the law maker and it should not be made to suffer the consequences due to delay in the submission of the fiscal incentives bill,” the BCCI president said. “I hope the impasse will be resolved soon as it is hampering businesses.”

Meanwhile, the Council has rebuffed the National Assembly’s stand that the former cannot reject a money bill. The Assembly recently objected NC’s rejection of the fiscal incentives bill in totality, stating that the bill lacked objectives.

“We did not commit any breach of law by rejecting the fiscal incentives. We have passed about 30 money bills. We are fully aware of the rules,” Deputy Chairperson Tshering Dorji said.

Assembly members are firm that the House of Review has no say over a money bill and that the Council’s rejection of fiscal incentives was not in line with the Constitution.

“While we know that we don’t have the supremacy over money bills, the Council can legally deliberate and vote on them,” he said. “So a money bill can be passed or rejected by NC,” he said.

However, some Council members are unhappy that the Assembly did not deliberate on the objections they had forwarded to the lower house. “Instead of deliberating on our objections, they wasted time by questioning the legality of our rejection of the fiscal incentives,” a Council member said.

The government has continued to maintain and argue that it’s the prerogative of the government to grant fiscal incentives to the private sector.

The government has cited Chapter 2, Section 3(2) of the Sales Tax, Customs and Excise Act 2000, which states, “On the satisfaction and in public interest, the Ministry of Finance may exempt a person from the payment of Bhutan Sales Tax.” Chapter 3 Section 5(2) of the Act states: “On the satisfaction and in the public interest, the ministry may exempt a person from the payment of customs duty.”

Following the Supreme Court verdict, the Sales Tax, Customs and Excise Act 2000 was amended in 2012, but Chapter 2, Section 3(2) and Chapter 3 Section 5(2) were retained.

The government has also cited Part II, Chapter 3, Section 9 of the Income Tax Act 2001, which states that on satisfaction and in the public interest, the ministry may grant exemption and tax holidays to certain businesses.

The Supreme Court verdict stated that it is the prerogative of the government to declare and grant fiscal incentives or to propose taxes to meet expenses of the government. “However, the exercise of the power to alter the rate of taxes by the government alone under the ultra-vires provisions of the Sales Tax, Customs and Excise Act 2000 under the implied authority to impose indirect taxes or by any other branch of government amounts to usurpation of power not granted by the Constitution,” the verdict ruled.

The verdict also ruled that imposing and altering of taxes must be decided by the elected representatives of the people in its entirety and not only by a sub-group represented by the executive. “According to the constitutional provisions it must be approved and passed by Parliament.”

MB Subba

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