Government to review property tax act if needed

Government to review property tax act if needed

Finance Minister also underscores the importance of taxation  

The government will attempt to resolve issues by reviewing the Property Tax Act if the PAVA rates in green zones, buffer zones, and other areas cannot be implemented effectively.

The Finance Minister, Lekey Dorji, said that the government is trying to review the PAVA rate assessment. “However, if it faces difficulties in implementation, as a last resort, the Prime Minister has instructed the ministry to review the act itself.”

The Member of Parliament (MP) from Wamrong, Lam Dorji, requested a modernization of the property taxation system to promote equity and fairness. The MP pointed out that the Property Tax Act of Bhutan 2022, enacted by the Parliament of Bhutan, is not entirely fair.

“The Act has exposed inconsistencies, such as land concessions based on aerial distance and the treatment of farm roads, which violate principles of fairness and equality,” the MP stated. He then questioned the Finance Minister about how the government plans to resolve these issues.

In response, the Finance Minister explained, “The move had a good rationale, considering aerial distance, where in the past, all were levied the same tax rate irrespective of market price and distance.” He added that the revision was intended to address the trade deficit in the country by the previous government.

Meanwhile in the National Council  (NC) the Finance Minister, Lekey Dorji, said that it is the obligation of the MPs to create awareness among the public about the importance of taxation. The property tax had not been revised since the revised taxation policy of 1992. In 2022, the Parliament enacted the property tax after about 30 years.

The MP from Bumthang, Kencho Tshering, asked the minister about concerns regarding the Property Tax 2022. The MP said that people across the country have raised concerns and worries about the substantial hike in land tax rates, particularly with the adoption of the government’s PAVA rate calculation method. “Previously, citizens were comfortable paying Nu 12 per acre for their land tax obligations.”

However, the MP noted that now land tax is payable each year on all land at a rate of 0.1% of the taxable land value. “The Act’s Chapter 4, Sections 19-23, gives concessions on land categorization identified by the Land Commission as per the Land Act of 2007.”

The MP emphasized that based on the current scenario of tax collection methods, the tax levied on citizens is unfair due to land categorization issues. This includes buffer land zones, red zones, high-altitude lands, and lapses in the taxation method based on the PAVA rate and radius method using GPS satellite data.

He shared that one of the pressing issues raised during constituency visits was the substantial increase in property tax. He asked if the ministry or government had any plans to table and review the property tax.

In response, the minister acknowledged public concerns regarding the property tax and its implementation inconveniences, noting that the act was revised by the previous government and implemented by the current government.

The minister said there are lapses in the assessment of PAVA rates concerning green zones and buffer zones. “We will review such lapses for the convenience of the people.”

Additionally, the minister said that previously, people had been paying Nu 20 and Nu 10 for permanent and semi-permanent houses, respectively, with Nu 20 per acre for wetland and Nu 12 per acre for dry land. “The taxes have been applied similarly to both urban and rural areas.”

However, the revised property tax is now based on property value to uphold fairness and equity. “The tax has to be paid as per the PAVA assessment at the rate of 0.1%.”

Addressing specific issues, the minister mentioned the need to study land used for community purposes like farm roads and explained that the 50% concession on dry land aims to achieve national food security.

The minister highlighted that Community Information Centre (CIC) operators have been integrated with local government to facilitate a smooth transition to the online platform, thereby reducing lapses in collection and corruption.

The minister also emphasized the importance of taxes in a democratic country.

The revenue generated from taxes is used to pay the salaries of civil servants. The government has collected Nu 650 million from property tax in recent years, a substantial increase compared to previous years. “However, we spent over Nu 2,400 million to pay the monthly salary of civil servants,” he reiterated.

By Nidup Lhamo, Thimphu