The Bhutanese Leading the way.
In response to recent queries about the vehicle price hike, the government has provided a detailed update on the matter during the 7th Meet-the-Press Session held yesterday.
Prime Minister (PM) Dasho Tshering Tobgay explained that the recent rise in vehicle prices is linked to the Tax Act of Bhutan 2022, which was carefully considered and debated by the previous government. He acknowledged that simply lowering taxes isn’t a simple fix.
The PM said, “We need to evaluate whether the tax changes are having the intended effect,” he further added, “If it turns out that they aren’t, we’ll revisit the issue and discuss it further during the upcoming winter or summer sessions.”
According to Ministry of Finance (MoF), the recent committee study reveals that the Tax Act of Bhutan 2022 introduced progressive taxation on vehicles. The taxes on petrol vehicles with engines under 1200cc remained unchanged while the taxes for 20-seater coaster bus were reduced by 10 percent, while those for vehicles over 1200cc were increased. The taxes on utility vehicles, primarily used by farmers in rural areas, stayed the same.
Finance Minister, Lekey Dorji, stated, “The tax policies should not be influenced by populist sentiments. The taxation must be meticulously designed to serve as an effective tool for the government to generate revenue, and support the country’s developmental initiatives.”
The committee compared vehicle prices from 2022, before the tax changes, to 2024 prices. Factors influencing these prices included model updates, features, production costs, insurance, shipping expenses, currency fluctuations, and dealer margins (see boxes).
Despite the lack of tax increases on vehicles engine capacity under 1200cc, popular models such as the Alto K10 (998cc), WagonR (1147cc), and Kia Sonet (1197cc) saw price hikes ranging from over Nu 57,000 to nearly Nu 200,000.
The prices of the WagonR, Alto K10, and Kia Sonet have increased by 6.80 percent, 10.87 percent, and 18.02 percent respectively.
Conversely, utility vehicle prices dropped by over Nu 79,000 even though the taxes remained unchanged.
A recent committee report highlights that under the Tax Act of Bhutan 2022, progressive vehicle taxation has been implemented. While taxes on petrol vehicles with engines under 1200cc have remained unchanged, there have been significant fluctuations in vehicle prices due to various factors.
Despite a 10 percent reduction in taxes for 20-seater coaster buses, their prices have surged by nearly Nu 1,900,000 attributed to changes in the bus model rather than tax adjustments.
For vehicles under 1200cc, price changes have been influenced by factors other than tax adjustments, leading to substantial increases or decreases.
Vehicles over 1200cc have seen price hikes, partly due to tax increases, with high-end models like the Toyota Hilux and Prado experiencing the most significant rises. The report indicates that non-tax factors often overshadow the impact of tax changes on vehicle prices.
Utility vehicles, such as the Bolero, which are crucial for rural areas, have experienced price drops of Nu 60,000 to Nu 80,000 due to a downgrade from BS6 to BS4 models, despite stable tax rates.
PM also shared that the Bhutan Construction and Transport Authority (BCTA) is studying for the new vehicle registration system following the recent lift of the vehicle import moratorium. This system is designed to streamline and improve the efficiency of vehicle registrations.
The government is closely monitoring vehicle prices and tax impacts, taking a cautious approach to ensure both economic stability and affordability for consumers.
