… on the ground of vague intentions
For the first time the National Council has rejected a money Bill, on the grounds of doubts and vague intentions.
The Bill was able to garner only seven ‘Yes’ votes, eight ‘No’ votes and the rest abstained.
The members of the upper house decided to deliberate the fiscal incentives in detail because the National Assembly already passed it as a money Bill.
While the NA has the prerogative over money Bill, the legislative cycle must be completed. This means that the council’s stands would be deliberated in the Assembly, which has the authority to reject or adopt the NC’s recommendations. It would then be submitted for Royal Assent.
The Council has submitted four reservations against the fiscal incentives.
The NC has cast its doubts whether the fiscal incentives would promote a balanced regional development and address the inequalities between the rich and the poor. From the earlier deliberations, there is an indication that the big businesses are benefiting from the incentives and that there is no distinction in incentives irrespective of whether business settings are in remote or urban areas.
Since tax revenue forms a major chunk of domestic revenue, the NC pointed out that if big businesses are entitled to tax breaks, the country’s domestic revenue would fall.
“This could lead to increased grants and loans, affecting the self-reliance goals,” the council’s report stated.
The Council also had doubts on whether the government has comprehensively analysed the new economic development policy. The Council stated that this is because the whole fiscal incentive Bill, which is based on the policy, are conflicting on some very important matters.
Besides, the Council also gave around 10 recommendations on the clauses of fiscal incentives Bill. For instance, the Bill states that the income tax exemption to small and micro businesses in the rural areas was granted for 10 years but shall expire by December 31, 2018. The NC recommended that tax break of 10 year be given irrespective of the deadline.
The Bill also grants five years tax holiday to newly established educational and vocational institutes located outside Thimphu and Phuentsholing Thromde. To this, the council recommended an additional clause stating that 10 years of tax break be provided in areas where there are no private schools.
While the fiscal incentive Bill grants five years of tax holiday to newly established selective private health services, the council recommended the need to attach a list of health services approved by the government.
Gasa representative of the house, Sangay Khandu, said that the legislative cycle must be completed. He acknowledged that it is going to be a long debate over what is money Bill and what is a financial Bill as separated by the Constitution. “The public finance Act must be amended in the due course because it treats both the Bill as the same.”
The public finance Act states that a money or financial Bill is a Bill, which deals with imposition or increase of any tax or abolition, reduction or remission of any existing tax. It also constitutes government spending that is, appropriation or payment of moneys out of the consolidated fund.
“If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker thereon shall be final,” the Act states.
However, as the Assembly decided to take the fiscal incentives as a money Bill, the Act also states that it shall be applied from the date of tabling, which is May 8, instead of January 1 as prescribed in the fiscal incentives Bill.
A money or financial Bill will originate only in the National Assembly and, after being passed, it would be presented to the Council. This Bill should be passed with recommendations back to the Assembly during the same session of Parliament.
However, the National Assembly shall submit the Bill to the Druk Gyalpo for Assent within fifteen days from the date of receipt of such Bill.
The Public finance Act also states that Where the National Council neither passes nor returns the Money or Financial Bill within five days of its presentation, the Bill shall be deemed to have been passed and the National Assembly shall submit the Bill to the Druk Gyalpo for Assent within fifteen days from the date of its presentation to the National Council.
“In essence, the NC could not pass the fiscal incentives, 2017, primarily because it has been drafted very poorly, leaving only a very vague Bill, which will take the authority of legislation outside the Parliament,” Sangay Khandu said.
Even in the earlier discussion, members pointed out that the fiscal incentive is not a sustainable strategy and it could be a challenge to the future government and thus the need to categorise as a money Bill.