PM declares fiscal incentives “constitutional”

Lyonchhen Dasho Tshering Tobgay, responding to Druk Nyamrup Tshogpa’s (DNT) allegations that the Fiscal Incentives 2016 is unconstitutional because they were not approved by parliament, said that “it is constitutional by precedent and by law”, during  Meet The Press on Friday.

Lyonchhen said as far as the government is concerned, providing the fiscal incentives is the government’s prerogative and does not have to go through parliament.

“That’s our interpretation and therefore the government is allowed to declare fiscal incentives,” said Lyonchhen.

DNT in a press release issued recently, had accused the Prime Minister of being a “double standard politician” because during the first ever constitutional case in 2010, when he was the Opposition Leader, he had sued the former government for increasing tax without Parliament’s approval and won the case.

However, Lyonchhen said that if the Supreme Court verdict on the first constitutional case was applied, it is not only the tax incentives that the present government granted that should be collected. The government should also collect taxes that the former government gave from 2013 to the December 31, 2015.

This is because the former government granted fiscal incentives in 2013 without Parliament’s approval although the Supreme Court verdict in 2011 had ruled that fiscal incentives should be passed through parliament.

According to Lyonchhen, the present government gave continuity to the same fiscal incentives from January 1, 2016 to May 8, 2017 and it did not feel the need to pass it through Parliament since the former government had not done so.

Lyonchhen said that the Supreme Court verdict also stated it is the government’s prerogative to decide and declare fiscal incentives or to propose taxes to meet government expenses.

“There was precedence and interpretation by the Supreme Court in which the fiscal incentives was discussed and the Supreme Court clearly mentioned, which provisions of law were illegal and which weren’t. Granting fiscal incentives is not unconstitutional,” said Lyonchhen.

PM cited Chapter 2, Section 3(2) of the Sales Tax, Customs and Excise Act 2000, which states: “On the satisfaction and in public interest, the Ministry of Finance may exempt a person from the payment of Bhutan Sales Tax.”

Chapter 3 Section 5(2) of the Act states: “On the satisfaction and in the public interest, the ministry may exempt a person from the payment of customs duty.”

Following the Supreme Court verdict, the Sales Tax, Customs and Excise Act 2000 was amended in 2012, but Chapter 2, Section 3(2) and Chapter 3 Section 5(2) were retained.

The government also cited Part II, Chapter 3, Section 9 of the Income Tax Act 2001, which states that on satisfaction and in the public interest, the ministry may grant exemption and tax holidays to certain businesses.

During the ninth session of the second parliament, the Fiscal Incentives 2016 was renamed Fiscal Incentives Bill 2017 after the Assembly agreed to treat fiscal incentives as a money bill.

“The finance committee reported this is a money bill and the government accepted it. Not because if it was not introduced as a money bill, it would be illegal but because of the principle behind: we believe it should be a money bill,” said Lyonchhen.

He added that “to impose or alter taxes we have to go to parliament but fiscal incentives are tax holidays and tax breaks for certain duration”.

Meanwhile, Lyonchhen commented that DNT is “desperate to engage” with the government.

According to Lyonchhen, DNT should issue press releases that are well thought out and understand issues before they raise them in so called national interest. “If they just want to be seen or heard, I think the motive is wrong,” said Lyonchhen.

Pema Seldon from Thimphu