Finance Minister says child-based tax deduction are planned to increase birth rate

During the Question-Hour session in the Parliament, Lingmukha-Toedwang MP, Namgay Wangchuk, raised concerns about Bhutan’s declining population and sought an update on the proposed Nu 10,000 incentive for third-born children.

In response, the Finance Minister, Lekey Dorji, acknowledged that while the initiative has been introduced, it is unlikely to yield immediate benefits in the medium term.

Lyonpo Lekey Dorji explained that in the 1980s, women in Bhutan typically gave birth to more than six children. However, according to the 2017 data, the average number of children per woman had fallen below two, even below the replacement rate needed to sustain population growth.

To counter this trend, Lyonpo shared several fiscal measures being implemented in the 2025–2026 financial year.

Women from rural areas and those facing financial difficulties will receive Nu 1,500 in support, with assistance from the Japan International Cooperation Agency (JICA).

The government has also revised tax deduction policies to ease the financial burden of raising children. According to the Lyonpo, there is tax deduction of Nu 1,000 for first child, Nu 1,250 for the second, Nu 5,000 for the third, and Nu 10,000 for each child from the fourth onward.

Lyonpo also announced that parents raising children with disabilities will now be eligible for a tax deduction recognizing the additional challenges faced by such families. Additionally, stipend rates in schools that provide three meals a day will be increased, a move aimed at encouraging young couples to consider having more children by lowering the cost of raising them.

One of the government’s key initiatives, the Third Child Policy, is currently in progress. As part of this, a cash incentive of Nu 10,000 will be provided for third-born children until they reach the age of three.

Lyonpo said, “The government has allocated Nu 31.5 million to implement this policy, which is expected to support efforts to boost the country’s population over time.”

Meanwhile, Khengkhar-Weringla MP, Dorji Wangmo, questioned how the ministry is addressing the root causes of the declining Total Fertility Rate (TFR).

She pointed out that with both parents working in most households, raising children has become increasingly difficult. The MP also highlighted the challenges faced by working mothers, noting that even after the six-month maternity leave for civil servants ends, many find it hard to balance childcare with their jobs.

MP Dorji Wangmo further said that even diapers are taxed, placing an additional burden on parents.

In response, the Finance Minister clarified that the claim about diaper taxation was incorrect. “The MP mentioned that even diapers are taxed, this is not true,” Lyonpo said.

Lyonpo Lekey Dorji said that the ministry is planning to establish more Early Childhood Care and Development (ECCD) centres and creche facilities.

These are intended to support working parents, particularly mothers, by providing childcare services once maternity leave ends.