The shift to a value-based property taxation system is rapidly transforming the country’s revenue landscape, driving collections up more than tenfold while keeping taxes minimal for most citizens, the Ministry of Finance’s (MoF) Mid-Term Review (MTR) of the 13th Five-Year Plan (FYP) reveals.
Annual property tax collections have surged more than tenfold – from about Nu 55 million (M) under the previous system to over Nu 600M in recent years – crossing Nu 624M in 2023 alone. The Finance Secretary, presenting the figures during the review, attributed the growth to improved valuation methods rather than across-the-board tax increases.
The value-based system calculates taxes according to the assessed worth of land and buildings, ensuring that higher-value properties contribute more. This shift marks a significant departure from earlier flat or area-based approaches and is intended to align taxation more closely with taxpayers’ ability to pay.
Despite the surge in collections, the reform has left most taxpayers largely unaffected in terms of financial burden. About 91% of properties fall within the lowest tax bracket, paying less than Nu 1,000 annually. On average, these households contribute around Nu 540 a year, underscoring the government’s effort to maintain affordability while expanding the revenue base.
At the other end of the spectrum, higher-value properties are generating a disproportionately larger share of revenue. Properties taxed above Nu 10,000 annually contribute significantly, with an average payment exceeding Nu 34,000. Meanwhile, those in the middle tax range account for 27.7% of total collections, reflecting a gradual progression in tax contributions across income and asset groups.
The Finance Secretary emphasized that the increase in revenue is not the result of raising tax rates universally, but of capturing property values more accurately. “Those with a greater ability to pay are contributing more under the new system”, the Secretary noted, highlighting the reform’s equity-driven approach.
The data also reveals a pronounced urban–rural divide in property tax contributions. Urban areas, though accounting for only about 6.7% of total properties, generate a dominant 56.5% of overall revenue. This concentration reflects the higher market value of properties in towns and cities, where commercial activity, infrastructure, and land demand are significantly greater.
In contrast, rural areas make up 93.3% of all registered properties but contribute 43.5% of total collections. The average tax payment in rural regions remains modest at Nu 372.
The capital, Thimphu, alone accounts for nearly 41% of total property tax revenue, underlining the concentration of high-value real estate in the country’s primary urban centre. Other key contributors include Paro, Phuentsholing, and Trashigang, further illustrating how economic activity and property values are clustered in specific urban and semi-urban regions.
Officials say this distribution is consistent with broader development patterns, where urbanization and infrastructure investments tend to drive up land and property values. The new taxation model is therefore seen as a mechanism to capture part of this value for public revenue without imposing uniform increases nationwide.
In total, Bhutan recorded more than 787,000 registered properties and over 174,000 taxpayers in 2023, indicating both a broadening tax base and improved administrative coverage. The expansion echoes ongoing efforts to strengthen property registration systems and enhance compliance, officials maintained.
An official reiterated that the strong growth in property tax revenue comes at a time when Bhutan is seeking to diversify its domestic revenue sources amid fiscal pressures and evolving economic challenges. “With external grants expected to moderate over time, strengthening internal revenue mechanisms has become a key policy priority,” the official added.
The Ministry noted that the value-based property tax system represents a critical step toward a more sustainable and equitable fiscal framework. “By linking tax liability to asset value, the system not only improves revenue performance but also enhances fairness, ensuring that wealthier property owners shoulder a proportionately higher share of the tax burden,” the official stated.
However, officials also conceded that public trust will depend on continued transparency in property valuation and clear communication about how revenues are utilized. “As urban property prices continue to rise, periodic reassessments will also be necessary to ensure that valuations remain accurate and reflective of market conditions,” the official highlighted.
Meanwhile, the Ministry acknowledges that even as the property tax reform is achieving its dual objectives of boosting government revenue whilst protecting low-income households, the challenge will be to sustain this balance while further strengthening administrative efficiency and taxpayer confidence.
Tashi Namgyal, Thimphu
