Govt. proposes major tax exemption and reduction 

Phub Dem

The government proposed major tax revision and duties including the green tax on goods such as telecommunication equipment, hybrid cars, and energy-efficient appliances yesterday.

The finance minister Namgay Tshering proposed the Tax (Amendment) Bill 2020 in the National Assembly.

To tap into the country’s hydropower potential and to reduce the dependency on the import of fossil fuels, the sales tax and customs duty on the import of hybrid cars were proposed to be reduced by an average of 50 percent if the proposition of tax amendment Bill gets endorsed.

The export of electricity roughly amounts to Nu 10 billion (B) annually whereas the import of fossil fuels goes up to Nu 9B.

For instance, the sales tax and duty on the import of hybrid (petrol and diesel with both plugin and non-plugin) were slashed to 10 percent from 20 percent.

The 5 percent green tax on a hybrid with diesel and petrol for public transport was also proposed to be exempted.

However, the green tax was waived off depending on the cylinder capacity (cc). No green tax would be charged on hybrid cars up to 1500 cc, whereas, 40 percent green tax was levied on cars exceeding 3,000 cc if the Bill is passed.

The revision, according to the chief executive officer of State Trading Corporation of Bhutan (STCBL), Kuenga Namgay was in accordance with the report by the company submitted to the government.

Although the revision might improve the sales of the company, he said that 50 percent exemption would not benefit the common users. “Both hybrid and EV are expensive and many cannot afford it.”

He also said that the future of transportation was electric vehicle, but it would take some time to completely switch to EV. The switch to hybrid cars was a temporary alternative while  developing infrastructure and technology development required for EV was in place.

The recently launched Energy Efficiency and Conservation Policy, recommended the government to provide fiscal incentives, based on viability, to compensate higher prices of the energy-efficient appliances in the market.

Considering the average export tariff of Nu 2.17 per unit of electricity, the country was expected to earn extra revenue of Nu 336M every year, by improving energy efficiency and standards in four major sectors: building, appliances, transport, and industry.

In keeping with the policy and to promote environment-friendly technologies, the government proposed to exempt sales tax and customs duty on energy-saving appliances.

The import of ‘parts of electrical appliances’ was proposed to forgo a total of 15 percent sales tax and duty.

The government also proposed to exempt 30 percent tax on the Light-emitting diode (LED) lamps.

To drive the digital transformation approach, the finance minister put forward the exemption on taxes and duties on telephone sets for cellular or wireless networks.

The telephone sets were levied 20 percent duty and 10 percent sales tax as of today.

The removal of a 5 percent voucher tax for prepaid users was also proposed for amendment. However, a sales tax rate at 7.5 percent would be levied on postpaid and tourist SIM.

He said that the prepaid users were mostly based in rural communities and there was no other way to bridge the gaps other than through tax revision.

The government further proposed a new chapter in the Tax Bill 2020 –revision of duty, sales tax, and green tax. The chapter will revise the sales tax, duty and green tax rates on the goods and services and tariff schedule based on the suggested exemption.

The taxation measures as per finance minister were expected to facilitate the redistribution of income, promote fiscal sustainability and lay a strong foundation for digital transformation.

“The revision will form an integral part of the economic road map for the current century.”

The Bill will be presented as a money Bill by the economic and fincance committee on January 30.

Meanwhile, the government also proposed the Fiscal Incentives (Amendment) Bill 2020 to continue the income tax exemption to small and micro-businesses in rural areas until December 2023.

The proposal was aimed to promote economic opportunities, livelihood, and employment in rural areas. The Bill, if endorsed is expected to benefit 12,571 micro trade licences holders.

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