Budget – taxes

Now really cheap

During his budget report last year, the finance minister informed the National Assembly that the government was implementing a range of measures to rationalize the sales tax and customs duty rates, and to broaden the sales tax base. The measures were expected to bring in additional revenue of Nu 450 million.

The government eventually withheld the implementation of all the increased taxes, except those that were imposed on vehicles. The taxes on vehicles were also lifted after the Supreme Court declared them to be unlawful.

This year, the government has submitted the Tax Revision Bill 2011 to the National Assembly along with their budget proposal. The Bill seeks to increase taxes according to the procedure outlined in the Constitution, the Public Finance Act and the orders of the Supreme Court.

Here are some features of the Tax Revision Bill that may interest you:

Taxes on vehicles. The increase in taxes proposed for vehicles is way below what the government tried to implement last year. Cars that have engine capacities of under 1.5L will be subject to 20% sales tax and 20% customs duty. Cars having engines between 1.5L and 2.5L will be subject to 20% sales tax and 25% customs duty. And cars that carry engines bigger than 2.5L will be subject to 20% sales tax and 30% customs duty.

Vehicles imported from India are exempt from customs duties. And vehicles that were ordered before the Bill was introduced will pay taxes at earlier rates.

Electrical and hybrid vehicles will not be taxed at all. So expect a surge in the number of hybrid vehicles within a few years. Bicycles are also fully tax exempt. That will come as good news to people wishing to bike to work or for pleasure.

Taxes on alcohol. Excise on domestically produced spirits have been increased only slightly, from 20-60% to 30-75%. Higher excise rates will be applied to cheaper alcohol, while the lower rates will be applied to more expensive brands.

The sales tax on imported spirits and wines has doubled to 100%, while customs duty on imported spirits and wines remains the same at 100%.

Beer will now be subject to 100% sales tax (up from 50%). And another 100% in customs duty will be charged on imported beer.

Packaged juices. The sales tax on all fruit juices packaged in containers below 250ml will be doubled to 30%.

Spare parts. The customs duties and sales taxes on a wide range of spare parts have been increased. But for some reason, customs duties on spares for certain boilers, generators, turbines and pumps have been reduced drastically.

 

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  1. Confused says:

    Hello Honorable OL,

    Call me ignorant, but I am confused if the latest tax bill has been passed or not? Are the taxes especially the vehicle tax final, or is it still going to be discussed in the NA?

    Am asking because, suppose I buy a car right now with new tax rates as of today, and then later on if they hike up the taxes to a figure like last year and make it final, I would not be able to afford the car. I have seen the MOF notification on BBS, but nothing regarding the new rates are mentioned.

    Thank you.

    • Yes, “Confused”, it is confusing. Taxes can only be imposed by passing a law. So the government has submitted the Tax Revision Bill 2011 on 20th June 2011. The Bill will be discussed in the Assembly tomorrow, and changes could be made to the proposed taxes. Yet, Section 4 of the Bill states that the Bill shall “… come into effect 20th June 2011, the day the introduction of the bill in the National Assembly”. Let’s see what happens tomorrow. Tshering

  2. I am with confused, when I was reading the 21st June issue of the kuensel, I saw in the notification section that the new taxes will take effect from the 20th of June, yet in the news section it says it will be discussed in the parliament for the next three days. Is out government doing something unconstitutional again?

    The new tax rate does not make sense at all. The taxes of juices with duty comes to 80% , and their excuse is it makes the city dirty, if that is the case, why don’t we tax everything in packages that much because they all make city dirty. The juice does not make city dirty it is the uncivilized Bhutanese people that make the cities dirty. We should implement a law like Singapore to make our cities clean.

    As for the car taxes go, I have never understood why our government waives duty on Indian cars while charging them on third country vehicles and I still don’t. Bhutan does not manufacture any cars, so we don’t have any domestic market to protect. India and other countries does it to protect their domestic car companies. They tax foreign vehicles so that domestic cars appear cheap and more people will buy them, but for Bhutan it does not make sense. Are we encouraging crappy Indian vehicles while restricting good foreign cars or are we bribed by the Indian car manufacturers?

  3. jamlepis says:

    Please read the supreme court verdict!…

  4. YPenjor says:

    I am fully with the tax revision proposal by the government.
    1)I do not own a car. I can never afford it. So, we the poorer society who cannot afford to buy a car will appreciate compensation of the smoke (CO, SOx, NOx) we breath in from the luxury societies’ cars. What we will expect from the government is to improve/enhance public transport services out of the tax money from the private car owners.
    2) I also aprpeciate the tax increase on alcohol. I like to drink and I drink heavily. Deep at my heart, I know drinking is not good for my health and pocket. But, when it is affordable, human temptation is challenging not realizing the opportunity cost of the small amount multiplied by huge quantity of liquor over a longer time period on myself and my family’s welfare. Higher price of alcohol I am sure will prevent me to a much higher chance of my drinking desire.
    3) Packed juices are not good for health, especially our young children and the packing materials are non-biodegradable solid waste source. Therefore, tax needs to be increased to prevent such on-hygienic and waste source products coming into the country and injuring our environment and the health. The Waste Prevention and Management Act, 2009 also encourages the government to impose fees and taxes to prevent and manage wastes sources.

  5. Yes, the verdict says taxes can come into effect as soon as it is introduced in the parliament, but I think it is going to be a abuse of power by the majority government. If it is going to be effective without even debating, what is the use of the national assembly discussions.
    What is some clauses get rejected, it creates more work for the government, because, they would have to go through the process of refunding all over again. I think the wise decision would be to wait till it is passed in the parliament. Right now it may not be a problem, because DPT has a huge majority, but we have to think about the future. I don’t think any future political parties can win with majority like that, so the law needs to change a little bit here.

  6. jamlepis says:

    i agree with truth…..supreme court should have thought about this issue while giving the verdict….

  7. Observer says:

    Agricultural Machinery & inputs will still remain exempted from Sales Tax & Customs Duty under the Fiscal Incentives 2010.

  8. revenue consumptions says:

    I was watching BBS yesterday (live) and today the rebroadcast. There was many for the motion on the tax revision and only a few against. In a short while the revision was put thorough without much debate. While budget session was going on FM mentioned there is deficit of revenues of 5.6b. It is no surprise since our country is aid driven.
    Here in short i like to state…there was no mention, not even a single person mentioning about the quotas…the privileged few get. How many dollars are lost through the name of quotas of wine for big shots. Is this not mentioned because every members and executives gets. When everything from cars/vouchers/housing is provided free…why not increase the tax base for that too. Why should government provide free housing when public money are paid as high salaries and perks.
    I limit here

  9. Ngawangley says:

    i am surpriesd by the way the government is revising and imposing tax that had been taxed already when there are lot of other things that need to be taxed.the government relly need to tax the DTH subscribers provided by the gaint indian and miltinational companies based in India. The subscribers of the Cable operators in bhutan are taxed Nu.69/- as an entertainment tax per television in a month by the Revenue and Customs office.i belive there might be around 10000 DTH subscribers in Bhutan.By the above figure the Government is loosing around Nu.8.28 million potential tax revenue in a year and this does not include the 30% Business income tax that could be collected if its been operated by the Bhutanese.

  10. @Truth
    On the issue of Indian cars not being taxed and other nation’s cars being taxed well my friend it called “Most favored nation” policies and it is to maintain and grow the diplomatic relations which Bhutan has with India, + Bhutan does not generate enough of dollar to make payments to other nations on for cars hence India returns the dollar to Bhutan after converting it back to INR …hope this would help you to solve “not so complex riddle”, and as far as cheap cars you are talking about are the same which you will end up buying from japanese or korean market its a different thing if you consider chinese cars better than indian cars (now that wld be a major intelligence issue )

  11. I believe that indian products is too better than bloody chinese duplicate product.good decision

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