Domestic revenue decreases by 14%

To meet the cost of recurrent expenditures from the domestic revenue amid the COVID-19 pandemic, the finance ministry will be implementing seven temporary fiscal measures

The total domestic revenue for financial year (FY) 2020-21 is estimated to be more than Nu 33.1bn which is one of the lowest in the recent past.

The Finance Minister Namgay Tshering presented the budget report to Parliament on Monday. Lyonpo said that it is 14% lower than the previous year mainly contributed by the COVID-19 situation.

Lyonpo mentioned in the parliament that the with the travel restrictions, the estimated tourism revenue accounting for 5% of the total domestic revenue may not be realized.

Lyonpo also said that sales tax collection from hotels, airport tax, Corporate Income Tax (CIT) and Business Income Tax (BIT) from tourism related business entities may sharply drop as these are closely linked to tourist arrivals.

Further due to the lock down in the neighboring countries, imports and exports have been affected, which will also result in lower collection of sales tax and customs duty.

The budget report of FY 2020-21 states that the implementation of the new tax measures passed by the Parliament will also impact the revenue collection, as 17% from estimated Personal Income Tax followed by 5% from CIT and 5% from sales tax will be foregone. The BIT and CIT deferment granted under the fiscal measures may have to be adjusted to the evolving situation of COVID-19 which will further aggravate the revenue performance.

The report also states that in order to ensure that the revenue targets are met, the Mangdechhu Hydropower Project will be maintained under profit transfer modality during the fiscal year and the commencement of debt servicing is scheduled for the beginning of 2021.

Lyonpo mentioned that with the grant of the Druk Gyalpo Relief Kidu (DGRK), acceleration of implementation of the 12th FYP activities through front-loading and new spending through the Economic Contingency Plan is expected to stimulate growth and enhance income generating activities, which will have positive impact on revenue performance.

Temporary fiscal measure s

To meet the cost of recurrent expenditures from the domestic revenue amid the COVID-19 pandemic, the finance ministry will be implementing seven temporary fiscal measures.

Lyonpo mentioned that the measures will be lifted when the pandemic situation improves and revenue performance improves. 

โ€œThe government has also readjusted the recurrent budget within the estimated domestic revenue, considering the revenue situation and constitutional requirement,โ€ he said.

Lyonpo said that the measures include rationalizing in-country and ex-country travels, not hiring private building for office space and transfer of civil servants to be without transfer benefits.

The other measures are deferments of leave travel concession (LTC) payments towards the end of financial year except for those completing terms or superannuating, postponement of the activation of salary indexation to next financial year, deferring the option to monetize vehicle quota during the financial year, without affecting the date of next allotment and providing current budget as annual (Block) grants to all the budgetary agencies.

The report states that the annual block grant consists of mandatory and controllable expenses. Salaries and wages, stipends, medical benefits, rentals, international subscriptions, and interest payment are categorized under mandatoryheads and the budget is provisioned on an actual basis.

Whereas, expenses such as office supplies, utilities and maintenance among others are categorized under controllable head and the budget for this category is provisioned as lump sum to provide flexibility to budgetary agencies in optimizing the use of current budget. For ensuring proper usage, the government will issue guidelines for annual grants.

Budget allocation for FY 2020-21

Lyonpo mentioned that the budget for FY 2020-21 aims to intensify and accelerate implementation of the programs and activities with the theme of economic resilience and transformation. Accordingly, the highest share of capital budget as percent of plan outlay has been allocated.

The total budget appropriation for the FY 2020-21 is estimated at around Nu 73.9bn of which about Nu 32.9bn is for current expenditure and around Nu 36.2bn for capital expenditure.

The budget appropriation is about 14% increase as compared to the approved budget of FY 2019-20.

The recurrent budget has decreased by 5% from the FY 2019-20 due to fall in domestic revenue. Of the total capital expenditure requirement, 56% would be mobilized through grants, 11% through external borrowings and the rest through internal borrowings.

The house referred the bills to the economics and finance committee for further deliberation. The committee is scheduled to report back its finding and recommendations to the house on June 6.

Dechen Dolkar from Thmphu