Alcohol tax in hotels towering at 205%

Alcohol tax in hotels towering at 205%

HRAB raises concerns over high alcohol tax and says tourists are even accusing hotels of price gouging

During the Fifth Monthly Last Friday Meeting (FMLM) between the Prime Minister (PM) and the private sector, held last week, the Hotel and Restaurant Association of Bhutan (HRAB) brought several issues faced by hoteliers in the country to the attention of the PM and other stakeholders.

Among the various challenges highlighted, one major concern was the high alcohol tax imposed on hoteliers.

According to Jigme Tshering, the chairman of HRAB, the tax on alcohol stands at an exorbitant 205%. Additionally, hotels are required to pay Nu 20,000 per brand as a branding fee, and an import levy of Nu 30 per cartoon. Furthermore, when hotels sell alcohol, they are also obligated to apply a 10% Bhutan Sales Tax (BST). These cumulative taxes result in excessively high prices for consumers.

Chairman Tshering pointed out that the aforementioned taxes do not even account for transportation costs.

“Consequently, many five-star hotels in the country have resorted to offering only one or two imported brands due to negative feedbacks from guests regarding the exorbitant alcohol prices,” he said, adding that this has created an unfavorable impression of Bhutan’s hotel industry among tourists, with some even accusing hotels of price gouging.

Additionally, the chairman of HRAB expressed hope that the government would consider reducing the tax burden on hotels. He emphasized that the hotels would greatly appreciate any form of tax reduction, whether through consolidation or other means.

“It has become important to lower the high alcohol tax to a reasonable percentage for the benefit of our guests, especially tourists visiting our country, as well as the hotel owners.”

 He said, “It is crucial that we find ways to alleviate the tax burden and create a more favorable environment for both our guests and the hospitality industry.”

In response to these concerns, the PM acknowledged the issue concerning alcohol tax but stated that as it pertains to taxation, there is limited scope for immediate action.

He highlighted that the current tax structure involves three separate slabs, including branding fees and an import tax of Nu 30 per cartoon. The PM expressed openness to consolidating these taxes but emphasized that any change related to taxation should be taken up in the parliament.

During the meeting, Finance Minister Namgay Tshering provided further insight, mentioning that the cabinet had intended to introduce amendments related to taxes in the current parliamentary session. However, due to several pressing matters, the amendments were deferred indefinitely.

On high import tax of alcohol, the Finance Minister cited an example and explained that local poultry farmers faced stiff competition from imported eggs, leading them to request increased import taxes to protect their market share.

 However, the recent increase in the price of local eggs has become a pressing concern for the public.

“Government had already revised the tax act last year to increase taxes on imported items such as cement, pasta, and ice cream, which are also available in Bhutan,”

Meanwhile, Minister Namgay Tshering emphasized the need for a holistic approach to address the complex taxation system comprising over 200 taxes, customs duties, and sales taxes.

He suggested that the branding fee on alcohol brands could be reviewed if it is not included in the tax law. However, if it is indeed part of the tax law, any necessary amendments would need to be presented in the parliament.

Another issue raised by the HRAB chairman concerned confusion surrounding the  loan moratorium.

According to him, some hotels undergoing renovation attempted to secure additional loans, which were considered as new loans. Consequently, these hotels were unable to obtain the necessary financing, leaving their renovation projects unfinished.

However, the finance minister clarified that the Royal Monetary Authority (RMA) notification specifically excluded renovation projects from the loan moratorium. It was decided during discussions on the loan moratorium that renovations could proceed, while new constructions that had not yet commenced would not be allowed.
Tshering Pelden from Thimphu