The Bhutanese Leading the way.
By Phub W. Dorji
Let me begin with what should be an uncontroversial observation: the debate triggered by Dr. Ahmad’s article in The Bhutanese last week, is not really about GST. It is about something deeper — the growing distance between how our economic policies are designed and how ordinary Bhutanese people actually experience them. GST has simply become the latest, most visible point of that friction. An anonymous ‘White Lotus’ on Facebook makes valid points against Dr. Ahmad’s views but misses the core message.
Dr. Ahmad’s piece, read carefully, is not a call to abandon tax reform. It is a demand that reform be honest — that it genuinely rationalise prices, protect the purchasing power of low- and middle-income households, and be timed with some sensitivity to the economic conditions of the people it affects. On those terms, his argument is sound, and the public frustration he describes is real, documented, and entirely rational.
White Lotus disagrees, and does so in places with technical accuracy. But a technically accurate argument can still miss the point entirely. That is, I would argue, precisely what happens here
On tone: why it matters
White Lotus opens by declaring that Dr. Ahmad “fails to understand the principle of taxation.” This is worth pausing on — not because it is the worst thing ever written on Facebook, but because it is symptomatic of a broader rhetorical pattern: discrediting the critic rather than engaging the criticism. Dr. Ahmad is an Assistant Professor of Political Science at NRC, Paro. One may disagree with his conclusions. But the suggestion that he simply does not understand taxation is not an argument — it is a way of avoiding one. And in a public debate that ordinary Bhutanese citizens are trying to follow and make sense of, that kind of dismissiveness does real damage.
Where White Lotus is right — and where it misses the point
Let me be fair: White Lotus makes several technically valid observations. GST is indeed a consumption tax, structurally distinct from income tax. Input tax credit does exist and is designed to prevent tax being charged on tax at the business level. And it is true that blaming GST alone for rising prices oversimplifies a more complex picture — inflation, import costs, supply chain pressures, and business pricing decisions all play a role.
These points are not wrong. But they answer a question nobody is actually asking.
The question ordinary Bhutanese are asking is not whether GST is theoretically distinguishable from income tax. It is whether, in practice, the same household income that has already been taxed is now being taxed again at the point of consumption. And the answer to that question is: yes, it is. The theoretical separation between the two instruments is real; the financial separation, from the perspective of a fixed-salary household, is not. The money comes from the same place. The pocket does not care about the taxonomy.
On cascading taxes: the argument needs precision
This is the point where I want to be careful, because the cascading argument is valid but needs to be stated precisely — otherwise White Lotus’s rebuttal lands.
White Lotus is correct that a properly functioning GST with input tax credit should reduce cascading — the phenomenon where tax is charged on tax at multiple stages. That is the design intention. The problem is that in practice, what we observe is not a neat chain of credits flowing back to neutralise prior tax burdens. What we observe is this: a wholesaler imports goods, adds freight, transport, insurance, loading charges, and his profit margin — and then applies GST to the total. The retailer purchases from the wholesaler, adds his own freight, transport, handling, and margin — and then applies GST again to his total. By the time the good reaches the final consumer, the GST is being applied not to the raw value of the good, but to a price that has been marked up, stacked, and inflated at every stage.
This is not “GST on GST” in the strict technical sense — White Lotus would be right to correct that framing. But it is GST applied to an increasingly inflated base, at every stage of the supply chain, with no correction mechanism available to the final consumer. The design may intend efficiency; the implementation produces compounding. These are not the same thing, and conflating them does not serve the public debate.
On input tax credit: who actually benefits
White Lotus presents the input tax credit as one of GST’s greatest virtues, and in principle, it is. Businesses can reclaim tax paid at earlier stages of the supply chain, which prevents them from being doubly burdened.
But notice who is protected by this mechanism: businesses. They reclaim, pass the residual on to the consumer, and their tax burden is managed. The final consumer — the ordinary Bhutanese household — has no input tax credit. No reclaim. No mechanism for relief. The credit flows up the commercial chain and stops precisely at the point where it would most help: the person with the least capacity to absorb additional cost. If the system is designed to protect businesses from double taxation, the honest question is why it offers no equivalent protection to the citizen who stands at the end of the chain.
On the ‘enforcement problem’ defence
White Lotus argues that if retailers are marking up prices beyond the actual GST burden, that is a failure of enforcement, not a failure of GST itself. This is a reasonable distinction in theory. But it cannot be repeated indefinitely as a substitute for accountability. The government introduced GST. The government enforces it through fines and penalties. The government therefore carries responsibility for the conditions under which it operates — including the behaviour it enables, the monitoring mechanisms it has or has not put in place, and the consumer protections it has or has not built into the framework. “The system is fine; the problem is how it is being used” is an argument that could be deployed to defend almost any policy failure. At some point, a system must be judged by its effects, not only its intentions.
On timing: the argument White Lotus never engages
Perhaps the most important and most consistently avoided point in White Lotus’s response is the question of timing. Dr. Ahmad does not argue that Bhutan should never modernise its tax system. He argues that doing so in the current economic moment — when household salaries are stagnant, when many sectors have not recovered from the disruptions of recent years, when the cost of living is rising and employment options remain limited — places an unfair burden on those least equipped to absorb it.
White Lotus responds that every major reform has teething problems, and that a system should be judged after proper implementation, not in its early days. This is not unreasonable. But it sidesteps the specific concern entirely. The issue is not that the system is new. The issue is that it is new at a moment when Bhutanese households are already stretched thin — and when the businesses benefiting from the new system’s protections are, year after year, reporting record profits. The pain and the gain are not being distributed equally. That asymmetry deserves more than a reassurance that things will settle down.
The broader picture White Lotus does not address
GST does not exist in isolation. It is one layer of an accumulating fiscal pressure on ordinary Bhutanese. Land taxes have increased. Property levies have expanded. Utility tariffs — electricity, telecommunications — are managed by bodies that operate without meaningful competition, which means consumers have no recourse but to pay whatever is charged. Public transport barely functions. Interest rates remain high. And now, consumption is taxed on top of income that was already taxed.
Bhutan has built its national identity on Gross National Happiness — the conviction that development must be measured not merely in revenue collected or GDP grown, but in the actual wellbeing, security, and dignity of its citizens. That is not a slogan. It is a commitment. And it is a commitment that demands we ask, seriously and honestly: does this tax, at this time, in this form, make Bhutanese lives better or harder? If the answer is ‘harder, for now, but better eventually,’ then that case must be made with evidence, transparency, and genuine engagement — not with dismissals of those who raise the question.
White Lotus may well be right that GST is not going anywhere. Politically, that is probably true. But political permanence is not moral justification, and exhausted acceptance is not the same as consent. Bhutanese citizens are not demanding the end of taxation. They are demanding something far more modest: a system that does not extract the most from those with the least.
We are being asked to fund first-world-like government initiatives on third-world wages, through a system whose protections are reserved for businesses and whose burdens fall on households. That is not modernisation. That is not GNH. That is a policy that has forgotten who it is supposed to serve.
Either fix it so it actually works for ordinary people — or have the honesty to admit it does not.
I write not as an economist or tax expert, but as a common Bhutanese citizen navigating the GST system and economic structures in our daily lives.