The Opposition has expressed concerns about the government’s proposal to reduce the customs duty to 10 percent from the existing rates of up to 50 percent on imports from third countries, saying that it will affect local industries.
The proposed customs duty will make goods from third countries cheaper in the Bhutanese market. But there are no changes in the customs duty on import of vehicles, alcohol, tobacco, gold and silver.
Opposition Leader Dorji Wangdi in the National Assembly yesterday said, “The proposed revision of the customs duty may definitely benefit in some ways. But economists have voiced their concerns saying that it will kill local industries.”
The proposal, he said, would also affect the agriculture sector and food self-sufficiency targets.
Bartsham Shongphu MP Passang Dorji (PhD) said that experiences from various countries had shown that the country could become a “junkyard” with the proposed customs duty.
He also said that it would affect economic sovereignty and that the country should strive towards becoming an export-based economy despite the disadvantage of being a small country. “We do need to import but based on necessities,” he said.
The government, he said, should also promote industries that have the potential to reduce dependence on imports.
“For example, we have great potential in wood-based industries, but unfortunately, a large portion of our imports are wood-based products,” he said.
Finance Minister Namgay Tshering denied that the proposed customs duty would affect local industries. He said that local industries have been protected through the tax waivers on the import of raw materials under the Fiscal Incentive Act.
Lyonpo also said that most of the imports come from India. “The government has carried out a proper study on possible impacts of the proposed customs duty and we are confident that it would not affect our industries,” he said.
The new customs duty has been proposed for more than 500 goods including medical equipment, agriculture and education-related products. In the case of goods imported from the South Asian Free Trade Area (SAFTA), the customs duty is levied based on the preferential tariff rates as agreed by the member countries.
However, the Opposition Leader added that the government’s perspective on economic issues was not right and that it needed to correct flaws that existed in the past. “Is it right to say that we have always been an import-dependent economy and should continue to be the same?” he asked.
OL Dorji Wangdi said that excessive imports would deplete the convertible currency (CC) reserve. “I’m concerned that the government’s strategy to build the CC reserve is through borrowings. We’d explore other options,” he said.
Tsirangtoe-Sergithang MP Garja Man Rai said that the proposed customs duty would benefit farmers as the cost of goods including agriculture equipment would be reduced.
Stressing on the importance of the agriculture sector, the MP said, “The agriculture minister in his recent visit to Tsirang said that there would be no shortage of agricultural products if we have five dzongkhags like Tsirang.”
Drametsi-Ngatshang MP Ugyen Wangdi said that it was not the right time to reduce the customs duty as the revenue was already affected. He said that even 15 percent would be acceptable but that reducing it drastically would further impact the economy.
He said that making foreign products like flowers cheaper could also have an adverse impact on Bhutanese culture.
The finance minister said that the revision of the customs duty would broaden the tax base. “We don’t want to import everything. The demand in the market, which is not expected to increase drastically, will regulate imports automatically,” he said.
The House will continue deliberation on the Bill today.
By MB Subba
Edited by Tshering Palden