The government has submitted all laws related to fiscal incentives to the National Assembly for amendment, Prime Minister Tshering Tobgay said.
“This is our responsibility,” he said.
Prime minister maintained that the government has clarified that it is the prerogative of the government to grant and declare fiscal incentives. “However, we have also said that there are big risks for these powers to be misused for corrupt practices, and personal gain.”
He said that the government, therefore, agreed with the Parliament that henceforth it should be submitted as a money bill and it should get the Parliament’s approval. “On the other hand, the laws allow the government the authority to grant fiscal incentives.”
He said those laws must be amended to require the government to seek Parliament’s approval before granting fiscal incentives. “Those laws that empower the government must be amended.”
Druk Nyamrup Tshogpa (DNT) filed a constitutional case against the government with the High Court for alleged violation of the Constitution by granting fiscal incentives without the Parliament’s endorsement on August 18.
DNT moved the High Court two months after it. It said prime minister and the finance minister must resign on moral grounds. The government granted fiscal incentives worth Nu 1.104 billion between January 1, 2016, and May 7, 2017.
The party argued that the government breached Article 14.1 of the Constitution, which states: “Taxes, fees and other forms of levies shall not be imposed or altered except by law.”
It stated that the government has violated the Constitution and the Public Finance (Amendment) Act 2012. DNT cited Section 46A of the Act, which states that a money Bill deals with “imposition or increase of any tax or abolition, reduction or remission of any existing tax.”
Finance ministry officials had earlier said that clauses empowering the government to grant the exemption and fiscal incentives in the existing laws would be proposed for amendment so as to relinquish the government’s authority over granting them. The amendment is proposed to empower the Parliament to grant fiscal incentives.
The Sales Tax, Customs and Excise duty Act 2000, Income Tax Act 2001, and Customs Act 2016 empower the government to grant tax exemption and fiscal incentives.
Most of these laws came before the Constitution and that the government found the need to align these legislations as per the Constitutional mandate, officials said.
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.