The Income Tax Bill 2020 was introduced in the National Council yesterday after the National Assembly passed it the previous day.
Presenting the Bill, Finance Minister Namgay Tshering said that the taxation measures were proposed to make taxes more broad-based and progressive to narrow the income gap by providing tax relief to the lower-income segments.
The proposed amendment is expected to facilitate the redistribution of income for narrowing the income gap.
The National Assembly passed the Income Tax Bill 2020 on January 30 with 40 of the 44 members voting in favour of passing the Bill.
One of the major reforms in the Bill is raising the income tax exemption from Nu 200,000 to Nu 300,000.
“The slab has been raised to enable civil servants to benefit from the salary revision,” the minister said. “It is not fair if there is no change in the income tax because, without the change in tax slabs, people might feel the government is taking away what they have given through the salary raise.”
The Bill also exempts PIT on pension income, a surcharge of 10 percent on the PIT of those whose annual personal income tax is equal to or more than Nu 1 million.
A new one-time income tax is also would be imposed on lottery winnings on all prizes equal to or more than Nu 5,000 per lottery ticket.
The Bill also increases the amount of total dividend income exempted from PIT from Nu 10,000 to Nu 30,000 per annum. Income from cash crops would be exempted from tax. It also includes the allowable deductions for education expenses for students will be the actual cost of the education expenses or Nu 250,000.
The allowable PIT deduction for education expenses is proposed to be Nu 20,000 per child in the absence of supporting documents.
The income tax rate for state enterprises is retained as 30 percent of the net profit, the Bill has reduced the corporate income tax (CIT) from 30 percent to 25 percent of their net profit.
The amendment is going to benefit 21,071 taxpayers, 377 private companies, 12,571 business entities, and 122 pensioners besides farmers who grow cash crops.
A member asked if the reduction in taxes for private companies would actually translate into better welfare of the employees in the private sector.
During the deliberations at the National Assembly, Prime Minister Dr Lotay Tshering said that the government would incur a revenue loss of about Nu 826.03 million due to tax exemptions but with the introduction of a surcharge on PIT, tax on lottery and SDF of 25 percent, the revenue generation by about Nu 986.77 million. “In addition, 7 percent GST broadens the tax base and reduces evasion, retaining about Nu 3 billion in revenue.”