Opposition defends Le Meridien FI case and attacks govt

At the press conference this week in Thimphu, the opposition party described the government’s charges against former DPT minister Yeshey Zimba of policy corruption and official misconduct, as ‘malicious political vendetta’.

The government has alleged that the fiscal incentives approved by then DPT Government in April 2013 was granted to benefit Hotel Le meridien, which belongs to the daughter of Yeshey Zimba. According to the government he chaired the Lhengye Zhungtshog meeting, in the absence of the prime minister, which approved the fiscal incentives in violation of established norms and practices.

The opposition leader Pema Gyamtsho said it is completely shocking the government could make such wild allegations against a senior and respected member of the former government and who was on the verge of retirement. “Such a vicious attack is most reminiscent of witch-hunting especially just before the upcoming elections,” he said “The Opposition Party never imagined that the government would stoop so low as to engage in such unfounded allegations and disturb the peace of the nation, setting a very dangerous trend for future governments to follow and to ruin a young democracy.”

Opposition Leader Pema Gyamtsho said the fiscal incentive was granted to benefit all tourist standard hotels, which fulfilled the set criteria. “A total of 92 hotels including Hotel Riverside, which belongs to the brother of the present Finance Minister Namgay Dorji have benefited from the incentives,” he said. “All hotels eligible for exemption differ in standards and level of investment and therefore are bound to differ in amounts of exemption. The exemption amount availed by Le Meridian was the highest simply on account of the very high cost of its investment as a five-star hotel and not based on any other consideration.”

Opposition MP Wangdi Norbu, who was the finance minister in the previous DPT government, said while implementing the Fiscal Incentives 2010, anomalies were observed that made the ground implementation difficult. “Integral parts of components or categories of items were treated differently for taxation purposes. Hotels built earlier like Taj Tashi received full benefits in keeping with the government’s policy and did not face similar problems,” he said.

MP Wangdi Norbu said that to clarify these anomalies the concerned agencies undertook extensive discussion and consultations following which a multi-sectored committee consisting of the Ministry of finance, the Ministry of Economic Affairs, the Tourism Council of Bhutan and the hotels Association of Bhutan, was formed to review and submit a specific list of items that fall under a particular category of exemption with respect to the hotel industry.

“Due to the time taken in the process of preparing and submission of the recommendations, the Cabinet could only approve the detailed list of eligible items in April 2013 only,” he said.

The former cabinet therefore did not approve additional incentive as the present government has charged but had merely clarified the anomalies, the opposition leader said, adding that the government has been granting customs duty and sales tax exemption on imports for all industries and tourist class hotels since the 1980s. The Fiscal Incentives 2013 was nothing more than a repetition of earlier tax exemptions.

“But the government has tried to dramatize and sensationalize the situation by mentioning a high figure of Nu 76.88m as the additional benefits to Le Meridien,” Pema Gyamtsho said.

He pointed out that the tax exemption appears high on account of the very high investment (cost) made for the Five Star Hotel. “It shows huge expenditures on import of quality inputs to promote “high value, low impact” tourism,” Pema Gyamtsho said, “The incentives do not come by ways of cash grants from the government and are just notional revenue forgone to promote tourism.”

He also said investment would not be there if customs duty and sales tax on essential imports are not exempted. In turn, the revenue that has been generated through the hotel and tourism industry would not be there had there been no investment. “These exemptions are quite normal worldwide when investments are being promoted to keep project cost low and improve viability,” he said.

According to a press release from the Opposition, the government has not mentioned the benefits that Hotel Le Meridien had brought to the economy in terms of high quality tourism particularly the employment and training of large number of educated youth (over 120 directly employed full time in the hotel).

“Many young Bhutanese were trained and engaged in highly skilled works which was appreciated even by the government itself. The spillover benefits include the development of capacity of national companies and personnel that gained experience from construction and management of the Le Meridien are today working on several prestigious hotel constructions,” he said, “Many have got good jobs in the hotels here and elsewhere. Hence the tax incentives have paid off and benefitted the economy in return.”

According to the Opposition, Lyonpo Yeshey Zimba as the Minister for Works and Human Settlements did not have any control over other ministries and agencies. In keeping with the procedures and standing practice, in the absence of the Prime Minister, the senior-most minister officiates and chaired the cabinet sessions.

Former Economic Affairs minister said Lyonpo Zimba would have needed to declare conflict of interest if the incentive was for hotel Le Meridien only. However, the incentive was meant to benefit all tourist standard hotels.

Based on the Penal Code of Bhutan, Opposition Leader said that Lyonpo Yeshey Zimba acted upon duly and performed his duty as imposed upon him by the law. “There is no act of official misconduct committed by him, rather we feel that this is a case of a desperate government trying to legitimize their ill-intended attempt to discredit and defame Yeshey Zimba.

The Opposition stated that if ACC does accept the PM’s request to investigate this as a conflict of interest case, it is setting an unhealthy precedence, undermining investor confidence and negatively impacting economic growth, creating an atmosphere of social distrust, disharmony and disunity and derailing democratic process and political stability.

The opposition leader also question the need for the government to wait for four and a half years before deciding to take it up with ACC. “Does it mean, it has its own interest in waiting for so long in order to allow its supporters to avail the benefits of the exemption? Is there not a clear case of conflict of interest with the timing to gain political mileage for the government? Would this not merit the investigation of all the other 91 beneficiaries?” he asked.

“On the one hand, the government is struggling to attract FDI, and on the other hand, it is dampening whatever little investment interest we have as a country. Investor, both domestic and foreign, need security and returns on investment and this requires political stability and consistency in government policies,” the DPT press release stated.

At the press conference the Opposition said that if the Government continues to accuse the Opposition Party, they would take the government to the court for various other reasons.

“We have around four to five issues that need to be looked into,” said opposition MP Ugyen Wangdi of Dramedtse-Ngatsang constituency. The first one is the government’s endorsement of Fiscal Incentive Act of 2017. We need to look into it as High Court dismissed Druk Nyamrup Tshogpa’s case against the government stating DNT doesn’t have legal standing.

He said the government had breached the constitution by granting fiscal incentives on customs duty and sales income tax.

The Opposition Leader, Dr Pema Gyamtsho said that according to law, everyone is responsible to remind the government, about the policies and laws if it does not benefit the people. “For instance, we found it inappropriate to of Thromdes in all 20 dzongkhags but we did not take the government to the court but the court came up with resolutions to stop the plan,” he said.

The establishment of Business Opportunity and Information Centre (BoIC), which was then renamed as Rural Enterprise Development Corporation Limited (REDCL) was another issue. Tax exemption on bookstores in 2015 was another initiative of the government, which they opposed, the Opposition mentioned.

The opposition also brought up what they said was the illegal income tax exemption to small and micro business in rural areas without following the due process of tax alteration by the Parliament.

The party described the allegations against the former minister as baseless and purely done to gain political mileage.

The party also brought up the issue of potential ACC cases like buying of boleros from one dealership, exempting import duty on second hand electric vehicles and an audit memo of Nu 3 mn for building a wall and guard house for the PM’s security at the PM’s residence which has been refunded by the PM.

The Opposition also accused the government for failing on the employment front with youth unemployment, corruption in employment programs and BOiC, inability to start a major project, wastage of resources through helicopters, power tillers and boleros, attempted corporatization of JDWNRH and not being able to fulfill its campaign promises.

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