A progressive Tax Reform

Traditionally, in the eyes of public officials one of the biggest sins a businessman could commit is to drive an expensive car.

Another fact is that many public servants favor SOEs over private companies and see the SOE fulfilling a national role, while private companies are regarded as not being part of the national narrative.

The above beliefs and more have constrained not only the private sector in Bhutan, but it has also discouraged foreign investment.

As a result, we have built a system that is keener to say what you cannot do instead of encouraging businesses to grow and invest.

This conservative attitude is also reflected in our tax laws which shows distrust of businesses and an attempt to maximize revenue.

However, in a refreshing change the Tax reforms introduced in this session of the Parliament is a major break from past laws and attitudes.

The new tax laws while using technology to improve tax compliance is also offering a lot of carrots.

Instead of trying to soak up ever Ngultrum it is a progressive tax system that encourages businesses to grow and invest.

The PIT reform will place more money in the hands of the salaried class and benefits not only the lower and middle income but also those with higher income. It offers some benefits to the disabled, first time home buyers and those having young children. 

The BIT tax reform under which can be filed as a PIT will place more money in the hand of small businesses and is fair.

The CIT rate reduction to 22% will place more money in the hands of companies which will allow for reinvestment and growth.

The removal of expense caps on marketing, HRD and R&D will encourage companies to invest in themselves.

The tax reforms also better align us with international standards. The cumulative effect is that Bhutan becomes a friendlier and more attractive destination for investment.

An important thing to watch out for going ahead is implementation especially in the realm of the GST. The GST itself is revolutionary and holds a lot of potential. However, care must be taken to prepare companies well for it and quickly learn from any issues that come up.

The tax reforms are calling on the private sector to help grow the economy and provide jobs. This is a refreshing change.

In this world nothing can be said to be certain, except death and taxes. –Benjamin Franklin