All dzongkhag municipalities are empowered to levy taxes and fees

Township: An increase in urban taxes is on the cards, but will it enable thromdes to be self-sustaining?

The thromdes, in principle, should be self-sustaining, but the existing four thromdes have not been able to meet current expenditure from the revenue collected from taxes and levies.

Given their size and population, the 16 new thromdes that will soon be established are likely to take years to generate revenue enough to meet their financial requirements.

Works and human settlement minister Dorji Choden said, “Thromdes in principle are supposed to be commercial and self-sustaining.”

“In fact, the existing thromdes are working towards achieving self-sustenance,” she said.

The expected increase in urban tax is not likely to fill the gap between the thromdes’ expenditure and revenues in the near future.  For instance, Thimphu thromde in the fiscal year 2012-13 spent a total of Nu 357M (million) while it collected Nu 91M as revenue.

With the proposed increase in urban tax, which is with the Cabinet, the revenue is expected to increase only by 17.72 percent for Thimphu thromde, 134 percent for Phuentsholing thromde, and 1.35 percent for Gelephu thromde.  Revenue for Samdrupjongkhar is projected to decrease by 0.73 percent.

Article 22 (5) of the Constitution states that a local government should strive to achieve its developmental objectives “within its financial and administrative capacity”.  The Constitution also states that the government should allocate some budget towards making thromdes self-sustaining and self-reliant.

To enable thromdes to become self-sustaining, the local government (amendment) Act 2014 empowers a thromde tshogde to levy land tax, property tax and property transfer tax and vacant or underdevelopment tax to execute developmental works.  Thromde tshogdes can also levy fees and charges, as prescribed by their rules and regulations.

Legislative committee chairman of the National Assembly, Lekey Dorji, however said the local government act itself does not prescribe that thromdes have to be self-sustaining immediately after their establishment. The Constitution states that a thromde is entitled to adequate financial resources from the central government in the form of annual grants besides its own revenue.

Meanwhile, the most significant change in the LG Act was the abolishment of the classification of dzongkhag thromdes as class A thromde and class B thromde.  The new act treats all the dzongkhag thromdes as equal, unlike before.  The Druk Gyalpo recently granted royal assent to the amended Act.

With the amendment coming into effect, dzongkhag thromdes have been empowered to formulate guidelines for entertainment and recreational activities and venues in consultation with relevant agencies.  They can also regulate and enforce land use and building activities in the respective thromdes.

The home and cultural affairs ministry was identified as the agency to ensure that members of local governments comply with the provisions of the Act.

A new section was added, stating that members of parliament may participate in the dzongkhag tshogdu, gewog tshogde and thromde sittings as observers.

The government will present boundaries of the new thromdes in the summer session of Parliament for approval.  The last session solved legal inconsistencies by amending the LG Act, which had hindered the declaration of dzongkhag thromdes.

The establishment of dzongkhag thromdes and dzongkhag yenlag thromdes in all 20 dzongkhags entails additional costs, involving the election of 16 more thrompons and many thuemis, purchase of pool vehicles for thrompons and setting up of their offices.

However, yenlag thromdes in every dzongkhag does not look like a reality at the moment due to lack of satellite towns in some dzongkhags like Gasa.  Dzongkhag yenlag thromdes will function either under dzongkhag administration or the gewog administration as decided by the government.

By MB Subba