Govt considers surcharge on fossil fuels, hiking vehicle registration fee and mineral royalty to meet revenue deficit

The COVID-19 pandemic has led to the government coffers taking a major revenue hit. Under the current economic circumstances, the Ministry of Finance has calculated that of the projected Nu 33.2 bn domestic revenue in 2020-21 Financial year it will meet only 30.4 bn which is a Nu 2.8 bn internal revenue shortage.

In the worse case scenario of repeated national lockdowns the revenue collection could come down to Nu 28.8 bn which is a gap of Nu 4.4 bn.

The government is looking at various ways to bring about economic recovery, but at the same time it is also looking at certain taxation measures to meet the revenue deficit.

The Ministry of Finance as part of its fiscal measures has proposed to increase the vehicle registration fee upwards for fossil fuel vehicles, do away with them for electric vehicles and then reduce them by 50 percent for hybrid electric vehicles.

Currently vehicles up to 1,500 cc (Alto, Santro etc) have to pay Nu 2,000 a year in annual registration fees. Then vehicles from 1501 CC to 2,500 cc (Creta etc) have to pay Nu 2,500 and and those at 3000 cc and above have to pay Nu 3,000 (Hiluxes, Prados etc).

Medium sized trucks (DCM etc) have to pay 8,800 a year, bigger trucks (Tata Truck etc) have to pay 13,000 a year and larger trucks (Tipper, Trailers etc) have to pay 17,000 a year.

Heavy earth moving equipment have to pay Nu 5,000 a year right now.

Electric vehicles currently have a Nu 2000 registration fee and for hybrid vehicles it is between Nu 2000 to Nu 3000 depending on the CC.

This is apart from a one-time Nu 500 for the blue book and an annual Nu 60 for the fitness test.

While the ministry has not specified how much it wants to hike the fees but the proposal to hike it nevertheless it has been put forward by the ministry to the government.

The MoF has proposed this as the RSTA regularly comes within the top 10 revenue generating entities.

In the 2018 July to 2019 June financial year it generated Nu 438 mn in revenue, the overwhelming bulk of which are its registration fees. Around 43 percent of it came from the Thimphu Regional Office.

The MoF has also proposed for the upward revision of mineral rent, royalty and fees for export of all RNR products including boulders.

The biggest impact here will be on the boulder business which has occupied the top slot in Bhutan’s exports until the Pandemic hit.

However, the proposal of the MoF to hike the above fees has not been supported by the Ministry of Economic Affairs which has said it does not support the revision of taxes, fees and charges and royalties for the time being as economy is not at its best. The MoEA has said that such things might have to be taken after a gap of one year or two.

However, the MoEA on its own part wants to levy a surcharge for fuel consumption.

The ministry has said that the silver lining in the current economic crisis is a big drop in the fuel prices globally arising due to various factors but primarily driven by a huge drop in demand for fuel.

It said that while end users stand to benefit from this fuel price drop, it must also be borne in mind that the Government has extended a lot of financial support to various sections of the society in the form of Kidu payouts, loan deferrals, interest waivers, etc.

It is estimated that just the cost of the interest waiver extended by the Government for a three-month period (April-June) amounts to Nu. 1.68 billion.

The MoEA said that the cost of the Government’s monetary interventions has to be met from other sources, which have also dropped due to the detrimental impact on businesses resulting in lower tax collections and other inflows.

The ministry said that to lower the burden of meeting the financial support to overcome this crisis, it is recommended that some of this cost be recouped by way of charging a small surcharge of about Nu. 2-3 per liter on the cost of fuel.

The ministry says this will ensure that the government will secure some income to meet the intervention costs while at the same time not burden the end users with additional charges.

This, according to the ministry, should be a temporary measure and should stop as soon as the cost of fuel reaches its “normal” levels.

The MoF and MoEA proposals are with the cabinet and have not been approved yet but are under discussion.

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