Gaedu College of Business Studies is carrying out impact analysis of past fiscal incentives
The Ministry of Finance (MoF) is working on a draft fiscal incentives Bill.
The current fiscal incentives will expire on December 31, 2020. The fiscal incentives are expiring amid the Covid-19 pandemic.
Finance Minister Namgay Tshering said, “The next round of fiscal incentives will be given in targeted areas based on the experiences drawn from the Covid-19.”
He said that the fiscal incentives would be aligned with the economic recovery plan.
The MoF, he said, had tasked the Gaedu College of Business Studies to assess the impact of the fiscal incentives in the economy that were approved in 2017.
“If there is no impact, what is the point of extending the fiscal incentives? We are expecting the preliminary report to be out soon,” he said, adding that the government’s decision on fiscal measures would be evidence-based.
However, the finance minister added that considerations would be given beyond the evidence, as it was not a normal situation due to Covid-19. He indicated that there would be changes in the areas of priority.
Fiscal incentives were passed as a money Bill for the first time in the summer session of 2017 after issues about legality of the fiscal incentives that were not passed by the Parliament arose.
If the precedence set in 2017 is anything to go by, the government will propose the new fiscal incentives in Parliament as a money Bill.
With the passing of the Fiscal Incentives 2017 as money Bill, the former government paved the way for a Parliamentary debate in deciding the fiscal incentives to be granted.
This, according to the finance ministry, is expected to ensure that fiscal incentives are provided in the priority sectors where there is potential for private sector growth, while eliminating potentials for vested interest and policy corruption.
As per the Fiscal Incentives Act 2017, sales tax and customs duty exemption came into force from May 8, 2017. But, prior to that, the former government had granted fiscal incentives worth Nu 1.104 billion from January 1, 2016 to May 7, 2017.
Druk Nyamrup Tshogpa in August sued the government for granting fiscal incentives (from January 1, 2016 to May 7, 2017) without passing through Parliament.
The High Court dismissed the case, saying that DNT lacked locus standi as it did not have presence in Parliament.
Fiscal incentives generally refer to a temporary exemption of taxes and duties or granting income tax holidays for boosting private sector development and attracting foreign direct investment (FDI) to achieve broader economic development goals.
According to the MoF, for a developing economy with limited domestic productive capacity, fiscal incentives could play a pivotal role in strengthen economy by boosting private sector growth and attracting FDI.