A meeting between members of the Government and the Opposition, which was called yesterday to forge a consensus on Fiscal Incentives 2016, ended inconclusively.

The chairperson of the finance committee, MP Karma Tenzin, said the meeting could not arrive at a solution. He, however, said that he was hopeful that the issue would be resolved by Monday.

The meeting was also attended by Finance Minister Namgay Dorji. “We couldn’t meet because of lack of a quorum,” said Finance Minister Namgay Dorji.

The National Assembly has agreed to consider the fiscal incentives as a money bill although it was introduced as a report.

The House has already resolved that the fiscal incentives should come into force from May 8, 2017, the date it was presented in the House.

However, sources said the government still wants them to be effective from January 2016. This is because although the fiscal incentives granted by the previous government expired in December 2015, they were continued even in 2016 without the parliament’s approval.

The fiscal incentives can be applied retrospectively from January 2016, only if it is treated as a report and not as a money bill.

The Opposition is determined to resolve the issue as per the law and wants the government to take responsibility for the procedural lapse. “We have met twice. There is no solution in the sight other than going by the book,” opposition MP Dorji Wangdi said.

A possible solution, the government is looking to propose is to treat the issue as a special case so that the fiscal incentives can be applied retrospectively from January 2016. That, in fact, will have to be done in violation of the Public Finance (Amendment) Act 2012.

Section 46B of the Act prescribes, “The imposition or increase of any tax or abolition, reduction or remission of any existing tax once passed as law by Parliament, shall be applied retroactively from the date it was initially tabled in the National Assembly”. The fiscal incentives were tabled in the House on May 8.

If the public finance Act is to be implemented strictly, the private sector is likely to be affected because the tax exemptions they have received from January 1, 2016 to May 7, 2017 were not endorsed by Parliament. In such a case, the business houses that have already received tax exemptions may have to be asked to refund, which the government is trying to avoid doing.

MP Dorji Wangdi said if the businesses have to refund the tax waivers it will be because of “the government’s failure”. “The opportunity to govern comes with responsibility. They should take responsibility for their failure,” he said.

“The private sector will face the brunt of the government’s failure if at all they have to make a refund. The government has to work with due diligence,” MP Dorji Wangdi said.

Citing the Supreme Court’s verdict in the first constitutional case, Prime Minister Tshering Tobgay said that it is the government prerogative to grant fiscal incentives.

The verdict stated: “The government under section 6 article 14 of the Constitution has the responsibility of ensuring that the cost of the recurrent expenditure is met from the internal resources of the country, it is the prerogative of the government to declare and grant fiscal incentives or to propose taxes to meet expenses of the government.”

The prime minister said the fiscal incentives granted by the previous government were not passed as money bills and that Parliament was not involved. “With that understanding the government granted fiscal incentives,” he said.

The assembly, he said was looking at the issue very closely. “If the Assembly decides to treat it as a money bill, so be it.”

“The government is not going to challenge or impose its views. We will be rather guided by the assembly’s decision,” the Prime Minister said. “If it is a money bill, it will be effective from May 8,” he added.

“But what will happen about the tax exemptions that have been granted from January 1, 2016 to May 7, 2017?” he asked, “We are considering it very carefully.”

Prime Minister said that precedence was set when the previous government granted fiscal incentives. “The Parliament was not involved when the previous fiscal incentives were given,” he said.

“If the fiscal incentives is not a money bill, past does not matter. If it is, then past matters,” he said.

Based on the Economic Development Policy 2016, the fiscal incentives were announced as part of the government’s efforts to stimulate economic growth, foster private sector development and generate employment.

Fiscal incentives 2016 include tax holiday, reinvestment allowance, income tax exemptions and exemptions in the forms.

Article 14(1) of the Constitution states that taxes, fees and other forms of levies shall not be imposed or altered except by law.

MB Subba