A move aimed at enabling class ‘A’ thromdes to be self-sustainable

Township: To meet at least some portion of the current expenditure and enable class ‘A’ thromdes to be financially independent, a possibility of revising urban taxes is being looked into.

A task force to review the 1992 taxation policy for urban area has also been formed comprising officials from the finance ministry, National Land Commission, works and human settlement ministry’s department of human settlement and four thromdes.

This follows the huge expenditure incurred on the four thromdes in developing and maintaining them.  All four thromdes – Thimphu, Phuntsholing, Gelephu and Samdrupjongkhar – spent more than the revenue they collected.

In the financial year 2012-13, Thimphu thromde made a total expenditure of Nu 357 million against its revenue generation of Nu 91 million.  In the same financial year Phuentsholing thromde spent Nu 107.03 million, while it generated Nu 49.82 million in revenue.  Gelephu spent Nu 59.23 million against its revenue of Nu 20.43 million.

This was presented during the fourth thromde coordination meeting in Thimphu yesterday.

The prime minister, works and human settlement minister and secretary and thromde officials attended the meeting.

While thromdes have potential to enhance their revenue generation, the current taxation policy (1992) was cited as the bottleneck.  Based on the 1992 policy, commercial land are taxed Nu 0.50 per square feet (sqft) and residential land Nu 0.25/sqft.

Building and houses, according to current rate, are taxed based on the classification of the structure that is classified into four categories.  Class A building annually paid Nu 100 per unit, class B paid Nu 75 per unit, Nu 30 per unit was levied on class C unit and Nu 20 on class D.

The task force, formed about two months ago, is working on revising the urban tax rates and fees on properties.  The revision proposed is less than 1 percent on house or building, land, under developed tax, vacant land tax.

With the revision, revenue generation for thromdes is expected to increase immensely.  For instance, the projected increase of revenue for Thimphu thromde is 17.72 percent, 134 percent for Phuentsholing thromde, and 1.35 percent for Gelephu thromde.  However, Samdrupjongkhar thromde’s projection is negative 0.73 percent.

Thromdes spend heavily on solid waste management, water supply, water treatment plants, infrastructure development and internal road network.

Should the revision of tax come into effect, which is yet to be finalised, house and building tax will be levied based on the value of the structure, as per the Bhutan Standards Rate.  The land tax will also be value based and as per the Property Assessment and Valuation Agency rates.

According to members of the task force, the urban taxation policy is being reviewed for the first time in the last 22 years, to meet the recurrent expenditures of thromdes.

MoWHS secretary, Dasho (Dr) Sonam Tenzin, said that the current revenue collected is inadequate to cover expenditures in many areas.  But for effective tax collection, there is a need for thromdes to update data on land and property registration.

“Governance in municipalities is the only answer,” he said. “Key to transformation of thromdes is to implant financial projects of revenue enhancement in different thromdes.”

Meanwhile, Prime Minister Tshering Tobgay, in his keynote address, said a huge amount of money has been invested in developing thromdes.  Having spent a huge amount, it was necessary to cross check if services were delivered to public.

He added that, if there were not enough water supply or road connectivity, it was not the fault of the thrompon or executive secretary, but the system.

“The four thromdes should work as examples for other upcoming thromdes,” he said. “Thromdes need to have a system that will benefit not only the public, but the thromde itself.”

By Nirmala Pokhrel