Amid growing public frustration over the steep surge in vehicle prices, particularly for entry-level family cars like the Maruti Suzuki Alto-which now costs over Nu 800,000, almost double its price before the 2022 tax revision—the government has outlined measures to address these concerns.
Analysis of Price Surge
The Ministry of Finance (MoF) attributes the price hike to factors beyond the 2022 tax revisions. The analysis indicates that while taxes for vehicles with engine capacities below 1200cc, such as the Alto, remained unchanged, other costs have driven prices up. These include increased insurance premiums, transportation costs, upgraded vehicle models with enhanced features, and dealer profit margins.
A recent study by the MoF also examined whether excess taxes claimed or charged by vehicle dealers have contributed to inflated prices. The Ministry hopes this review will lead to price reductions.
Alternative Solutions under Review
To provide relief to consumers, the government is considering several measures:
Direct Purchases from Manufacturers: A Parliamentary Committee is studying the feasibility of allowing individual buyers to purchase vehicles directly from manufacturers, bypassing Bhutanese dealerships. The Ministry of Industry, Commerce, and Employment (MoICE), along with the MoF, has been tasked with evaluating whether this approach would be cost-effective for customers.
Collaboration with the RMA and Department of Trade: The MoF is working with these agencies to formalize mechanisms for direct purchases from foreign dealers, potentially reducing reliance on domestic agents.
Prime Minister Dasho Tshering Tobgay has instructed authorities to expedite these studies to offer practical alternatives to customers.
Impact of GST Implementation
The Ministry of Finance highlighted that the upcoming implementation of the Goods and Services Tax (GST) could lead to reduced vehicle taxes. Under the GST framework, tax collection will shift from the point of sale to the point of entry, improving tax efficiency and potentially reducing administrative burdens for both consumers and businesses.
Dealer Accountability and Transparency
The government has called on licensed vehicle dealers to review their pricing structures and minimize profit margins where possible. The MoF is also monitoring dealer practices to ensure transparency and fairness in vehicle pricing.
Public Confidence and Economic Balance
The government emphasized its commitment to balancing sustainable economic activity with public confidence. While there are no immediate plans to revise vehicle taxes, these ongoing assessments and potential reforms aim to provide clarity and fairness to consumers, fostering a transparent and equitable vehicle market in Bhutan.
Meanwhile, this comprehensive approach reflects the government’s focus on addressing the rising cost of living while maintaining economic sustainability.
By Tashi Namgyal From Thimphu
