As of March 31, 2025, the Royal Government of Bhutan (RGoB) has collected Nu 2,944.81 million (M) in Personal Income Tax (PIT) for the income year (IY) 2024, marking a substantial 47% increase from the Nu 2,005.54M collected in 2023.
According to the Ministry of Finance (MoF), this surge in tax revenue is primarily attributed to mid-2023 salary revisions for civil servants, followed by similar adjustments in corporate and private sector salaries. “The increase in salary levels across various sectors has significantly boosted the total tax collection,” an official from the MoF stated.
The surge is also because of low risk of tax evasion due to TDS mechanism.
A common concern in tax systems is the potential for tax evasion. However, the ministry asserts that Bhutan’s tax compliance remains high due to the widespread use of the Tax Deducted at Source (TDS) mechanism. “While it is difficult to guarantee that every taxpayer is fully compliant, the risk of tax evasion is relatively low due to the mandatory withholding of taxes by government agencies, corporate entities, and private businesses,” the official explained.
Despite this, the official acknowledged that evasion can still occur through underreported income, cash transactions, false deductions, or non-filing of returns where additional tax liabilities exist.
Taxpayer Trends and PIT Collection Breakdown
In 2023, a total of 60,237 PIT filings resulted in Nu 1,749.70M in revenue—an increase of Nu 248.50M compared to IY 2021, where Nu 1,501.19M was collected. However, the number of high-income taxpayers has declined. Records indicate that despite higher PIT collections, fewer individuals are filing returns.
A significant portion of taxpayers—24,791 individuals—fall within the income bracket below Nu 300,000, where no PIT is payable. In comparison, this group comprised 24,287 taxpayers in IY 2021.
The highest PIT contributions came from individuals earning Nu 1,500,000 and above. During the IY 2022, this group comprised 659 taxpayers, contributing Nu 859.10M—an increase from Nu 562.21M in IY 2021, despite the number of taxpayers in this bracket declining from 734 to 659.
The second-highest PIT revenue was collected from individuals earning between Nu 400,001 and Nu 650,000. During the IY 2022, a total of 10,771 taxpayers in this bracket contributed Nu 320.39M. However, this was a decline from IY 2021 when 16,651 taxpayers in this category paid Nu 402.91M.
Those in the income bracket of Nu 650,001 to Nu 1,000,000 also saw a slight decline in tax contributions. During the 2022 IY, 3,552 individuals in this group paid Nu 253.37M, compared to 3,641 individuals paying Nu 263.39M in the IY 2021.
However, challenges in tax collection and compliance level still persist.
While MoF has made significant strides in improving tax collection, it faces several challenges, including difficulties in gathering accurate data, transitioning to digital systems, and staffing shortages. One of the most pressing issues is the underreporting of rental income. “Property owners often fail to declare their rental earnings, leading to tax revenue losses,” the official noted.
To address this, the Department of Revenue and Customs (DRC) has enhanced data collection efforts by integrating the Property Tax System and conducting periodic physical rental surveys to identify undeclared properties.
Additionally, the transition to a fully digital tax system has faced hurdles. The implementation of the Bhutan Integrated Taxation System (BITS) has been delayed due to staffing constraints and challenges in migrating from legacy systems.
“The rapid evolution of tax administration technologies has created a temporary gap in experienced personnel, compounded by staff attrition rates,” the official explained. Nonetheless, efforts are ongoing to streamline tax collection and improve overall tax administration efficiency.
Meanwhile, in it’s strive towards strengthening compliance and securing future outlook, the DRC continues to emphasize the importance of taxpayer compliance, stressing that every citizen’s contribution is vital to national development. “By adhering to tax regulations and filing their returns honestly, taxpayers contribute to building a stronger economy and ensuring sustainable growth,” the official said.
Looking ahead, the government remains committed to strengthening tax administration, improving digital infrastructure, and enhancing taxpayer compliance to ensure continued revenue growth in the years to come.
Nidup Lhamo from Thimphu
