46,105 tax payers will enjoy the exemption
Tax: Should the proposed revision of the basic exemption limit of Personal Income Tax (PIT) go from Nu 100,000 to Nu 200,000, the government will have to forego a revenue of Nu 484 million (M) annually.
Even as the proposed revision of royalty and mineral rent is expected to garner additional revenue of Nu 129M, the government will still lose Nu 355M.
However, Prime Minister Tshering Tobgay said 46,105 people will not have to pay their taxes. Under the existing slab, 14,413 people enjoy the exemption. Some 31,692 people whose income exceeded the exemption limit under the existing slab will now enjoy the exemption.
The finance minister said the slab was not revised since 2001 and accounting for annual inflation, the slab should have actually reached Nu 237,084. The country’s basic PIT exemption limit, he said is the lowest in the region.
“Considering the erosion in value of money, the revision was felt necessary,” he said adding the existing slab has affected low-income earners.
While this revision in slab would come at a cost of domestic revenue, it is also a constitutional mandate to meet the country’s current expenditure from domestic revenue.
As per the budget report for the 2016-17 fiscal year, more than 93 percent of the domestic revenue will be drawn to finance the current expenditure of Nu 25.38 billion (B).
The estimated domestic revenue of Nu 27.24B is a 3.6 percent increase from the previous fiscal year.
Further, the domestic revenue totted up with external grants, was estimated at Nu 41.6B, which is around Nu 8.3B short to meet the budget outlay resulting in a fiscal deficit of 5.3 percent of the GDP.
Lyonchoen Tshering Tobgay however said the government while prioritising the planned activities will also explore other avenues to complete the 11th Plan successfully.
The additional revenue from mining, establishment of the Royal Bhutan Lottery Ltd, Dagachhu hydropower project and increase in surplus transfer from the Royal Monetary Authority (RMA) on account of the improved rupee reserve are expected to enhance the domestic revenue, Lyonchoen said.
He added that the government realised more domestic revenue than projected in the last two fiscal years. A combined revenue of Nu 42.1B was projected in 2013-14 and 2014-15 fiscal years. But the actual revenue realised was Nu 2.8B more than the projected. The government expects a similar trend in coming years.
Lyonchoen also attributed the increase in domestic revenue to the reduced debt service obligation as most high interest bearing non-hydro loans were repaid. The rationalised spending of the government was also cited as one of the reasons.
Should the additional revenue materialise, the government is hoping to maintain a fiscal deficit below 3 percent of the GDP.
Meanwhile, the allowable deduction for education expense on the PIT, which is being proposed to triple from Nu 50,000 to Nu 150,000, is to cover the rising cost of education.
“Parents should now be able to spend more on education of their children,” Lyonchoen said.