KP Sharma
As public frustration grows over the sharp rise in vehicle prices, the former ruling party, Druk Nyamrup Tshogpa (DNT), has defended its tax reforms, asserting that these measures were essential during a time of unprecedented crisis.
The spike in vehicle costs has been linked to the Tax Amendment Bill 2022, which has significantly impacted the pricing of automobiles in the country. For instance, the popular Alto K10 LXI, with a cylinder capacity of 998cc, now costs a staggering Nu 0.76 million.
The current government has distanced itself from the controversy, attributing the increase in vehicle prices to the tax reforms initiated by the previous government.
Finance Minister Lekey Dorji last week said that the current government did not endorse any new tax hikes and the increase in vehicle prices is due to the taxes raised by the third government in 2022.
In a press release yesterday, the DNT stated that the tax reforms were a necessary response to the severe challenges faced by the country during their tenure.
The party highlighted that Bhutan faced a series of crises during its tenure, including the Covid-19 pandemic and its subsequent economic fallout, which threatened both lives and livelihoods, forcing the DNT government to make difficult decisions.
“It is not in our principles to pull political stunts, let alone try during such adversities,” the DNT stated, adding that its decisions were driven by necessity rather than political motives.
DNT explained that the economic impact of the pandemic, compounded by the Russia-Ukraine war, significantly increased imports, severely straining the country’s foreign reserves. “Caught between the devil and the sea, we were left with fast depleting foreign reserves on one hand and ballooning trade deficit on the other,” the party stated. And faced with this dire situation, the DNT introduced the vehicle import embargo and revised the Tax Bill in 2022.
Defending its approach to taxation, DNT argued these steps were aimed not only at increasing revenue but also at modernising the tax system.
The party cited examples of tax reductions on essential items and green initiatives, such as cutting taxes on hybrid and electric vehicles and eliminating taxes on mobile phones and energy-saving devices.
These measures, the DNT stated, aligned with the country’s vision for green growth and digital competency.
However, DNT acknowledged the public’s frustration over rising vehicle costs. “With the tax revision playing up the cost of vehicles today, while increases in production, transportation, and foreign exchange rates have also added to the amount, we understand the prevailing public sentiments.”
The DNT also criticised the current government for lifting the vehicle import moratorium without conducting a thorough review of vehicle pricing and taxes. The party argued that such a review should have been conducted before lifting the moratorium.
The former ruling party also reiterated its belief in progressive taxation as essential for the country’s growth, pointing to the revision of property tax during their tenure, which resulted in increased revenue, much of which is being channeled into infrastructure and services in rural areas.
“We have also lost enough time in looking back and blaming the past. This was never a part of the DNT’s game,” the party said, urging the government to view the taxation system through the lens of nation-building rather than populism.