In an open letter to the people of Bhutan, the Opposition Party, has expressed their views on “recent concerns regarding the high vehicle prices following the lifting of the moratorium and the tax revisions implemented by the previous government in 2022.” It has also provided insights for the 2022 Tax revisions, and said that moving forward, “The Ball is in the Court of the New Government.”
“We understand that these changes have significantly impacted individuals, households, and businesses across Bhutan, particularly with the increased prices of vehicles and other goods. We want to acknowledge your concerns and provide a balanced perspective on why these measures were introduced, while also outlining the path forward for the current administration,” the letter reads.
Concerning justification for the 2022 Tax Revisions, the Opposition has said that the tax revisions enacted by the previous government in 2022 were a necessary response to the economic challenges the nation faced. “The global economic environment had been severely impacted by the COVID-19 pandemic and other international events, such as the Ukraine-Russia conflict, leading to rising inflation, a significant increase in the trade deficit, a sharp decline in foreign currency reserves, and economic imbalances that required immediate attention,” the letter states.
According to the Opposition, the decision to revise taxes, particularly by increasing levies on non-essential and harmful goods while reducing them on essential commodities, aimed to achieve several key objectives, such as:
Addressing the Trade Deficit and Foreign Currency Reserves: By discouraging imports of non-essential goods and encouraging local production, the government sought to reduce the outflow of foreign currency and support the stability of our reserves. (The trade deficit in 2022 was Nu. 61.9 billion, accounting for almost 30% of GDP, and foreign currency reserves had depleted to the extent of breaching the Constitutional requirement.)
Promoting Public Health and Environmental Sustainability: Higher taxes on goods harmful to health and the environment aligned with broader national goals to safeguard the well-being of our citizens and protect our natural environment.
Fostering Local Industries: The revisions were also intended to boost local industries, particularly cottage and small industries (CSIs), which are vital to our economic fabric.
“The Opposition Party believes that the 2022 tax revisions were justifiable and aligned with the pressing needs of that time,” the letter reads. .
Moving on to “The Path Forward,” the Opposition has said that “the Ball is in the Court of the New Government.” “While we acknowledge the efforts of the previous government in navigating those difficult economic times, we now face a new reality. The economic conditions today are different. The vehicle import moratorium was lifted on the premise of improved foreign currency reserves, and the economy has a positive growth outlook. The Government must reassess and recalibrate our fiscal policies to reflect the current situation,” the Opposition has said. .
In lieu of the above, it has urged the new administration to:
Evaluate the Outcomes: Assess whether the intended goals of the 2022 tax revisions have been met. Have we successfully reduced our dependence on imports? Have local industries grown as anticipated? Is the cost burden on essential goods manageable for our citizens?
Reconsider Fiscal Policy: Take into account the new economic realities as the landscape continues to evolve, and proactively recalibrate fiscal policies, possibly during the winter session of Parliament. This may involve refining tax policies or implementing new strategies to ensure economic stability and growth.
Engage Stakeholders: Recognize that taxation affects all of us—from local businesses to consumers. We urge the Government to consult widely with the private sector, civil society, and experts to ensure that any future tax policies are fair, effective, and aligned with the broader goals of national development.
“While the 2022 tax revisions were a necessary response to the economic conditions of that time, we understand the concerns of our citizens regarding their impact, especially on increased prices. We, therefore, urge the government to consider public sentiment and make informed decisions that ensure the prosperity and well-being of all Bhutanese people,” the Opposition has reiterated.
Acknowledging the previous government for its audacity and willingness to take tough but unpopular decisions in the nation’s larger interest, the Opposition has said that they stand ready to provide constructive support and to work together towards the continued prosperity and well-being of our beloved nation.
