A total of 844 businesses benefited from tax exemptions and other fiscal incentives under the Fiscal Incentives (FI) Act 2017, the finance minister said yesterday in the National Council (NC).
He was responding to questions from members after presenting the Fiscal Incentives Bill 2020 in the Upper House.
Lyonpo Namgay Tshering said that the country had received 28 Foreign Direct Investment (FDI) projects under the FI Act 2017, 50 percent of which are in the manufacturing sector. He said that 25 percent of the FDI came in the ICT and the rest in hotel sector.
The existing fiscal incentives include income tax exemption of 10 years on convertible currency earnings from export by newly established manufacturing and ICT service companies.
The finance minister said that 87 hotels had availed fiscal incentives under FI Act 2017 and another 90 hotel proposals had been given “technical approval” under the same Act.
The Act grants income tax holiday of 10 years and five years to newly established tourist standard hotels and existing hotels upgraded to tourist standard hotels, respectively.
“The fiscal incentives have benefited in terms of tax revenue and job creation,” Lyonpo said in his response to NC members’ questions on whether and how the fiscal measures had benefited the economy.
Lyonpo informed that those businesses that benefited from the fiscal incentives together created some 2,100 jobs, mostly in the hospitality sector. He added that about 80 percent of workforce in the hospitality sector, however, had lost their jobs.
Highlighting the financial implications of the fiscal incentives, Lyonpo said that the government had forgone Nu 6.5 billion (B) in taxes. In return, the government received a total of Nu 5.3B as taxes from the business establishments that availed fiscal incentives under the FI Act 2017.
The fiscal measures, which came into effect in the middle of 2017, were devised by the PDP government in line with the Economic Development Policy 2016. The income exemption, tax rebate, additional expenditure deduction, sales tax and customs duty exemptions and concessional customs duty, among other incentives, will expire on December 31, 2020.
Lyonpo said that manufacturing establishments had benefited in the form of tax exemptions on the import of machineries for establishment of plants.
One of the main objectives of the fiscal incentives, he said, was to create jobs through private sector development, adding that they were achieved to some significant extent.
The government has extended the expiry date of the FI Act 2017 up to June 30, 2022 without changing the areas of priority.
NC member from Haa, Ugyen Namgay, expressed concerns about the extension of the fiscal incentives to all the beneficiaries irrespective of how each sector has been affected by Covid-19.
The blanket extension of FI Act 2017, Lyonpo said, was needed as almost all the businesses were affected by the Covid-19. He said the new fiscal incentives would be evidence-based and will be given in targeted sectors.