The Bhutanese Leading the way.
During the Question Hour on Friday, the Member of Parliament from Wamrong Constituency asked the Finance Minister when the government would establish Pay commission to raise salaries of public servants.
Finance Minister Lyonpo Lekey Dorji said every elected government since 2008 had established a pay commission and that the current government too will do at an appropriate time.
He said the third government though financially stressed due to Covid-19 had amassed huge central government public debts with 22 billion (bn) in bonds and 12 bn in Treasury Bills mostly to pay public servants and meet recurrent expenses – provided a huge salary raise of over 50% to all, principally because of the Benevolence of our King who had committed USD 100 million (mn) through the sale of bitcoins. That raise alone, effective 1st July 2023, had put Nu. 6,800 mn additional expenditure every year to the Ministry of Finance.
Lyonpo said things are improving now because of the 22 bn in bonds, 5 bn in bonds and all 12 bn in TA bills have been cleared off and another 3 bn bond will mature in 2026. Reserves have improved from USD 596 mn when he took over the Ministry on Jan 28, 2024 to over USD1,038 mn now, despite lifting construction and vehicle import moratoriums. Punatsangchu 2 has been commissioned and the Government has made bold tax measures effective 1st Jan 2026.
He said income tax measures would put more disposal income in the hands of our people which are civil servants, corporate employees, private sector employees, and business people;
He said Corporate income tax reduced from 30% to 22% and business income tax merged with PIT would reduce tax burden on businesses and the PIT would reduce due to slap reductions.
He said there are no taxes on inter-corporate dividends and only 10% withholding taxes on dividends.
There is home ownership interest tax exemption of 2 lakhs a year, education allowances from 20k to 50k, child tax exemptions up to 10k per child over four children, disability tax exemptions up to 40k, etc.
Additionally, the sales tax which were levied 0-100% is replaced by a single simple 5% GST with exemptions only on rice, salt, oil, wheelchairs and sanitary napkins.
Lyonpo said these tax measures are expected to reduce government revenues in the order of multiples of billions. “We need to see the certainty of the tax revenues.”
Lyonpo said public expenditures are going up. “Out of 13 questions to me this question hour, many Hon MPs are asking the Gov to open offices, rebuild bridges and roads, etc which need more public funds. The principal and interest payments on public loans alone each year is over 30 bn.”
“While revenues go down, expenditures are going up. This means fiscal deficit.”
Lyonpo said with raise in public servants’ salaries, there will be inflation and those who don’t get the salary increases which is farmers and private sector employees will be adversely affected.
“Therefore, the impact of the public sector wage on private sector development needs to be understood clearly because our economy is the sum total of consumption in public and private sector.”
He said it is important to understand all these and the fiscal sustainability of the government as required of the Finance Minister by the Public Finance Act 2007.
Lyonpo said I said they hope to be able to establish pay commission as per article 31 of the constitution as soon as possible. “We just need to work hard to improve our economy.”
Lyonpo later said the PDP pledge about raising the public servant salary depends on the economic and fiscal situation of our country.
