Corrupt quotas

The government’s decision to increase taxes on vehicles has caused a bit of stir.

Many people I’ve spoken with agree with the progressive taxes based on engine capacity. But most, like I, doubt if simply increasing taxes will help achieve the government’s goal of controlling the growing number of vehicles in Bhutan.

Why? Because public transport, in Thimphu and elsewhere, is still inadequate. And, in the absence of a reliable public transport system, we will continue to buy cars, even at relatively higher prices. A real reduction in traffic volume will be possible mainly by improving the public transport system to provide adequate coverage, and to make the service cheap, punctual, comfortable and, most importantly, popular.

But there’s another reason why increased taxes will not affect sales of imported cars: allotment of foreign vehicles, commonly called “quotas”, to public servants. Civil servants in Grade 6 and above are entitled to a quota once every seven years. And senior officers in the armed forces also enjoy a similar entitlement. Last year, some 380 quotas were issued. The year before that, many more, as every MP also received a quota.

Obviously, some public servants use their quotas as intended, that is to purchase vehicles for themselves. But many quotas find their way into the black market – they are sold, illegally and at hefty prices, to buyers who can then avoid paying duties and taxes.

So ordinary quotas – those that exempt taxes and duties on Nu 800,000 of a vehicle’s cost – were selling for about Nu 45,000 before the government’s announcement. Today, they already cost Nu 100,000.

The price for “Prado quotas” – those that exempt all taxes and duties for Toyota Prados – has also doubled. They are only a few of them left, and they were selling for Nu 200,000 until the day before yesterday. Today’s price is a whopping Nu 400,000!

The allotment of foreign vehicles to senior public servants costs the exchequer dearly. But worse still, it causes rampant corruption. So it should be discontinued. And in its place, monetized entitlements should be provided.

Improve public transport. And discontinue quotas. Only then, will the government be able to control the growing number of vehicles.

Taxing cars

Car park

Car park

So our government is thinking about increasing the taxes, duties and other fees levied on vehicles. I suppose that that, in some ways, is inevitable. The number of vehicles plying on our city roads has increased drastically. And it’s already difficult to find proper parking spaces. So, unless something serious is done about it, we would have to deal with many traffic problems, including regular traffic jams.

But I wonder if our government has thought about the most obvious way to control traffic congestion: scrap the import quota system. Import quotas, which are given only to public servants, are directly responsible for the growth in vehicle numbers. Every quota is used. And, it’s common knowledge that, many times, the quotas are sold, illegally, to private individuals.

So discontinue import quotas. And replace them with a sensible allowance built into the salaries of public servants. That would cause an immediate reduction in the number of cars we purchase.

However, that won’t be enough. So taxes and duties would also have to be increased. But be careful. If the increases are meant to address traffic congestion, then apply them where the problem exists – in Thimphu and Phuentsholing. And use the money to improve and expand subsidized public transport in these cities. Most other places do not have traffic problems. In fact, their problem is quite different. They do not have adequate traffic, particularly local public transport.