Finance ministry clarifies on amendment of laws to grant fiscal incentives

The finance ministry has clarified that any proposal for tax exemption and fiscal incentives shall be processed as money Bill as per the Constitution.

Finance secretary Nim Dorji said that clauses empowering the government to grant exemption and fiscal incentives in the existing laws are proposed for amendment so as to relinquish the government’s authority over granting them. He said the amendment is proposed to empower the Parliament on granting fiscal incentives.

The secretary said that the amendments of the existing Acts and the case of OAG coming up with a new money bill, which was reported earlier in Kuensel are two separate issues. “The amendment is proposed for existing acts and will be submitted as urgent bills,” he said. “The money bill issue comes in because henceforth, any fiscal incentive that is proposed has to be come in as a money bill.”

The Sales Tax, Customs and Excise duty Act 2000, Income Tax Act 2001 and Customs Act 2016, which empower the government to grant tax exemption and fiscal incentives is being reviewed for amendment.

This amendment will be submitted in the upcoming winter session of the Parliament as an urgent Bill.

Finance secretary Nim Dorji earlier said that most of these laws came before the Constitution and that the government found the need to align these legislations as per the Constitutional mandate.

Chapter 3, Section 8, Part I and Chapter 3, Section 9, Part II of the Income Tax Act states that the finance ministry may grant exemption and tax holidays to certain companies and businesses on satisfactory justification and in public interest. The same clause in the Sales Tax, Customs and Excise Act 2000 gives the finance ministry the authority to exempt a person from paying sales tax and Customs duty.

The Customs Act 2016 also states that the ministry may exempt a person from the payment of Customs Duty in accordance with international law, convention, covenants ratified by the Parliament, in addition to its relevance on social, environmental, and economic policies of the government.

Fiscal incentives granted post May 8, the day on which fiscal incentives are tabled in the Parliament, has become legitimate as it has now become an Act. However, the government has decided to seek the Speaker’s intervention to seek the opinion of the Supreme Court on fiscal incentives granted before May 8.

The total estimated revenue foregone between April 4, 2010 to December 2015 was Nu 4.89B. Similarly the revenue forgone between January 1, 2016 to May 7, 2017 is Nu 1.14B. Of this amount, Nu 1.10B pertains to FI 2010 and Nu 42.36M is on account of new incentives granted under FI 2017.

Tshering Dorji

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