The Bhutanese Leading the way.
There has been uproar among the public regarding the significant increase in vehicle prices that has followed the lifting of the vehicle import moratorium.
Finance Minister Lekey Dorji attributed the recent surge in vehicle prices primarily to tax increases instituted by the previous government under the Tax Act of Bhutan 2022. “While our government has not introduced any new taxes since coming into power, the tax increases from 2022 are now becoming apparent,” Lyonpo Lekey Dorji explained.
The previous moratorium, which restricted vehicle imports, meant that the tax hikes were not felt immediately. With the moratorium lifted, the impact of these tax increases is now being experienced by consumers. “The vehicle moratorium was a measure taken by the previous government to control import volumes. Our administration, upon lifting this moratorium, has observed that the impact of the tax increases from 2022 is now affecting vehicle prices.”
The vehicle tax was imposed by the previous government in August 2022.
Lyonpo Lekey Dorji identified several key factors contributing to the current rise in vehicle prices. “Apart from the tax hikes, other elements such as increased costs at the source, shipping and transport expenses, insurance costs, and foreign exchange rate fluctuations are also playing a role. While taxes are a significant contributor, they are not the sole reason for the price increase.”
In response to growing consumer concerns, the Ministry of Finance has established a multi-sectoral team to study and review the current vehicle pricing dynamics. This review may consider factors, such as tax increases from 2022, among other potential reasons. The findings of the review will be made available to the public once the report is completed.
Once the committee reveals the findings, this will be able to clarify the situation, and the consumers can research ex-factory prices of vehicle and compare them with dealer prices to better understand what constitutes a fair market value for vehicles in Bhutan as per the Finance Minister.
Addressing concerns about transparency in vehicle pricing, he noted that while the government cannot control prices, efforts will be made to clarify the taxation elements. The ministry is trying to make the taxation process more transparent.
The Maruti Suzuki Alto 800 is currently priced between Nu 700,000 to 800,000 after taxes while the new Maruti Suzuki Celerio ranges from Nu 800,000 to Nu 900,000. The Maruti Suzuki WagonR is available for approximately Nu 850,000 to 900,000.
Since the advent of democracy car taxes have been increased in 2012, 2014 and 2022 all with the aims of safeguarding scarce foreign reserves, raising revenue and restricting the import of vehicles in general.
Simply put, the import driven Bhutanese economy does not earn enough foreign currency to allow largescale car imports.
While the public complain about the high prices of cars the high taxes of 2022 will be a blessing in disguise for the foreign reserves which stood at only USD 624.11 million in June 2024. A huge volume of vehicle imports would have a major impact on the reserves needed for essential imports.
