Intent of the fiscal incentives vague

The nexus between business establishments and political parties could lead to more revenue leakage from the fiscal incentives.

This was the highlight of deliberations on the budget and appropriation Bill in the National Council yesterday.

The Trongsa Council representative Tharchen said political parties need votes and financial support. “It is obvious that that big business establishments provide financial support to political parties,” he said.

He said that the whole intent of the fiscal incentives is misplaced. For instance, he said most of the tax breaks are given to businesses that are already proving to be lucrative. On the contrary, farmers are taxed on their income from cash crops. He implied this case to the recent taxation on income from cardamom in some rural pockets.

“On one hand the government acknowledges the importance of agriculture sector and on the other, farmers are taxed,” he said.

He also recommended that the government should review as to how the fiscal incentives has narrowed the gap between the rich and the poor and that who has benefitted the most.

Eminent member Tashi Wangyel questioned as to why the mining sector are given tax incentives.

The mining sector enjoys sales tax and customs duty exemptions on purchase of equipment and machineries in addition to 10 years tax holiday for newly established mineral based industries until December 31, 2020.

He said mining is one of the most lucrative businesses and incentives in this sector are irrational.

Another aspect of the fiscal incentives, the members questioned, on the approach of balanced regional development.

Lhuntse’s representative, Tempa Dorji also said that tax incentives are granted irrespective of the location. “So, whether you set up a business in rural or urban area, the incentives are the same,” he said adding this discourages rural businesses aggravating the issue of rural-urban migration.

While there are indirect tax (sales tax and customs duty) exemptions for import of busses and trucks used by passenger transport entities, an income tax (direct tax) holiday of five years is extended to taxi and car hire service providers.

Zhemgang representative Pema Dakpa said there are some transporters who are operating in the rural sectors with very limited or no profit at all. If rural development is on the agenda, he said such passenger vehicle plying in rural pockets should also be granted income tax holiday.

Chhukha representative Pema Tenzin also said that trucks carrying goods should also enjoy similar incentives because it could result in lower transportation cost, which in turn would contribute in lowering consumer prices.

Although members pointed out that the intent of the fiscal incentives are not clear, the council could only provide recommendations on which the Assembly has the prerogative as it is a money Bill.

The deliberation on the budget will continue today and the Council’s recommendations on the budget and appropriation Bill would be endorsed.

Tshering Dorji

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