Removal of 5% voucher tax not possible in 120 days

The government would lose Nu 200mn annually once the 5% voucher tax is removed

The Druk Nyamrup Tshogpa (DNT) government will not be able to waive off 5% voucher tax in 120 days as pledged since it is a tax issue and the Parliament has to deliberate and pass it.

According to the Department of Revenue and Customs (DRC), the revenue earned from telecommunication services on voucher tax averages Nu 200mn annually. In 2017, Nu 222mn was earned as revenue from voucher tax. 

The removal of voucher tax will mean the government will have to forgo around Nu 200mn in revenue every year.

Responding to a Business Bhutan question during the Friday Meet Session on Wednesday, Minister of Foreign Affairs Dr.Tandi Dorji said the removal of 5% voucher tax will not be tabled at the ongoing Parliament session. “Whenever national issues are raised, the government of the day should not hurry. Careful analysis and studies have to be done.” Said Lyonpo.

The foreign affairs minister said that the Ministry of Finance has done an excellent analysis and presented the report to the cabinet. However, since it involves taxes, the discussion on voucher tax removal was deferred till the whole tax reform can be made. “It would take a few more months and in the first one year, the tax reforms will be done,” said Lyonpo.

Finance Minister Namgay Tshering said that the issue has been discussed in the cabinet and since the government is coming up with major reformsin taxation,the ministry is closely looking into broadening the tax base.

The government is also planning to introduce Goods and Services Tax (GST)in Bhutan and increase the Personal Income Tax slab to Nu 300,000 for low income and middle incomegroup. The government has also pledged to do away withBusiness Income Tax for business firms earning lesser than 200,000 annually.

“All these tax reforms will come under a packageof major tax reforms,” said Lyonpo.

The Finance Minister also said that the government is looking into ways to make up for the revenue loss incurred through the removal of 5% voucher tax.

The People’s Democratic Party government imposed the 5% voucher and it was implemented from October 2014. The 5% tax deducts Nu 5on every Nu 100 voucher and Nu 2.5 on every Nu 50 voucher.

The DNT pledged to remove the 5% voucher tax in its 120 days pledges.

The DNT claimed that since this tax system applied to all telecom service users in the country includingfarmers and poorer section of the population, the removal of the tax would largely benefit the poorer section the most.Although it is minimal of Nu 5 and Nu 2.5 but the weight of the tax is felt when it is accounted cumulatively and over long period of time.

Under the current tax system, all telecommunication service users such as prepaid, postpaid Internet and landline users are imposed 5% tax on the amount spent on using these services.It is learnt that the postpaid and internet lease lines users are the ones who usually pay more compared to other service users. This is basically becauseInternetservices are based on package systems.

Bhutan Telecom had around 438,037 mobile subscribers and TashiInfoComm Limited had around 267,640mobile subscribers as of September 2018.

Dechen Dolkar from Thimphu