The finance minister yesterday tabled the Fiscal Incentives (amendment) Bill 2020 extending the current exemptions to December 31, 2021.
Exemptions under Fiscal Incentives Act 2017 expire on December 31, 2020, except for the income tax exemption to small and micro businesses in rural areas, which will end on December 31, 2024.
Presenting the rationale behind the proposal to extend the fiscal incentives without changes, Finance Minister Namgay Tshering said that the Covid-19 situation was unpredictable to devise any long-term fiscal incentives at the moment.
He also said that an economic roadmap that will be the mother of all economic policies was being drafted and that the fiscal incentives needed to be aligned with the mother document.
“We are not proposing any change except for the extension of the duration by a year. We don’t know how the situation will evolve in six months,” Lyonpo Namgay Tshering said.
According to the finance minister, a study has been carried out by the Gedu College of Business Studies on the impact of the incentives that were implemented during the last five years. The findings of the study, which he did not share, will form a part of the basis for devising fiscal incentives in the future.
Members unanimously supported the government’s proposal by a show of hands.
The Fiscal Incentives Bill will be forwarded to the National Council for deliberation but the recommendations of the House of review will not be binding as it has been introduced as a Money Bill.
The finance minister said that the private sector was the engine of growth and that it needed help from the government to prosper. He said that the private sector plays an important role in enhancing the GDP.
The current fiscal incentives include tax holiday, reinvestment allowance, income exemption, exemption of tax deduction at source (TDS), additional expenditure deduction, tax rebate and sales tax and customs duty exemptions.
To name a few, the fiscal incentives include tax rebate of 10 percent on assessed tax amount to businesses employing 100 percent Bhutanese nationals with no less than 20 employees and income tax holiday of 10 years to CSIs and co-operatives.
In total, there are 60 different types of incentives under FI 2016, of which 36 incentives are the continuation from the FI 2010 and 24 are new incentives, nine direct tax incentives and 15 indirect tax incentives.
According to the finance ministry, the government has forgone more than Nu 4.89 billion (B) (M) in revenue from April 2010 to December 2015.