Following  the revision in property tax where property owners, for the first time, are made to pay tax in proportion to their income, taxation policy in the country has become the topic for discourse even if it is mostly about  why an outgoing government took  such an “unpopular”  decision.

Taxes are important even if they are not seen as the source of government revenue. Like the Resident representative of UNDP, Mohammad Younus said, it is a profound social contact between citizens and the state. Progressive tax system is a proven taxation policy or even an economic tool to bolster economic growth while ensuring equality and fairness in the society.

If our current tax policy  relied  on assumptions, incentives, and deductions, it is a flawed policy. And if the Income Tax Act 2001 has become outdated and fails to accommodate the changing landscape of digital assets, cryptocurrencies like bitcoin, and blockchain technology, it is not a fair taxation system.

There is a national dialogue on tax justice, enhanced compliance, and a renewed social contract happening. The timing is good. Notwithstanding the silent complaints, property owners are complying with the revised tax laws. We can surmise the revenue from taxes will help in improved domestic revenue. To put into context, a 13-decimal landowner in Semtokha is paying four times the amount she paid last year.

Critics say Bhutan’s taxation policy is rich centric. Economists are already concerned about the dwindling revenue from the various tax reforms in the recent past.  If Bhutan’s tax base was already narrow, the increasing amount of revenue foregone through incentives is eroding the tax base and creating considerable challenge in mobilising domestic revenue.

Domestic revenue collection is receiving growing attention in recent years. For instance, the Organisation for Economic Co-operation and Development (OECD), the World Bank and many more are calling for more determined action to combat tax evasion and avoidance. Developing countries are urged to increase their own tax collection.

The more important reason, close to Bhutanese is the rising inequalities. There are many factors leading to the growing inequalities in a nation striving for “a just and harmonious society.” Taxation is one. Experts have estimated that the inequality is so stark that one Bhutanese in the mining sector is earning as much as 10,000 other Bhutanese.

The salaried group is wondering why they pay income tax when the proprietor of rich luxury hotels, started with the grandest proposal, are coming in their flashy Prados to declare their loss, year after year. If our tax base is narrow, we  grant tax holidays and concessions to already rich businesses and companies.

How we ensure that every Bhutanese enjoys the fruits of progress can be only addressed through policy intervention. With Bhutan graduating from the category of least developed countries, observers are pointing out that the government should start imposing new taxes like wealth tax, inheritance tax or even capital gains tax.

The revised property tax has left a dent on the income of property owners, but there is no outcry. They know the government needs revenue to fund development activities. In the capital city, thousands of property owners are expecting improved services like proper roads, drainage system, streetlights, parks and reliable drinking water. Some are even bullying the Thrompon demanding services after they had paid their  revised taxes.

The Thrompon’s hands are tied. The revenue goes to the government coffer and he depends on the government. As we start a dialogue on tax justices, it would be right to discuss if thromdes should keep a good share of the revenue collected to be invested back for the residents and property owners.

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