Govt creates a new SOE for Duty Free Shops

Thimphu’s duty free shop, located along the Norzin Lam, is an iconic landmark where senior bureaucrats and politicians go to get their annual quota of duty or tax free shopping in the form of mainly fine wine and the occasional perfume.

The shop also does brisk business with many tourists, restaurants, hotels and also Bhutanese without quotas going there to buy alcohol and other luxury items.

The Cabinet, in a decision taken in September 2015, has decided to delink the duty free shop from the government and turn it into a State Owned Enterprise. This would separate it from the Department of Revenue and Customs (DRC) under which it currently functions.

The Finance Minister Lyonpo Namgay Dorji said, “The job of the Ministry of Finance is to control and look after the resources and not engage in commercial activities and since the duty free shop is a commercial activity it is better for a SOE to manage it.”

Lyonpo also highlighted that the other major reason is that as an SOE it would have better scope for commercial operations and in doing so could enhance its revenue.

The lone duty free shop in Thimphu has been doing very well for itself as it currently has about Nu 122 mn in total profit in its bank account and another Nu 64 mn in stocks and assets.

The minister said that the SOE status will also mean that it would take over the duty free shop in the Paro airport which until recently was under Druk Air, which retained the profits and revenue in its account.

The SOE also has a plan to start a small outlet in Phuentsholing thereby maintaining a presence in all three major towns of Bhutan.

The shop in Thimphu currently has around 14 employees and will take in another five people or so but it would expand with its operations.

The Finance Minister said that there would be criticism from the private sector and some people saying it would affect the business of shops engaged in similar businesses.

However, the minister pointed out that the duty free shops dealt in exclusive duty free items normally not found in other shops so it would not affect their businesses. He said the SOE would also provide for employment opportunities.

The SOE is expected to take off from November 2015 and will be under a board of directors. The SOE will not be under DHI and instead will be under the MoF.

Currently in terms of annual quota of annual duty free shopping the Prime Minister gets USD 5,000 a year quota, ministers get USD 3,000 a year quota and secretaries get around USD 1,500 a year quota. The quota here means that only this amount of shopping is allowed duty free after which they will have to pay the normal duty rates. The quota keeps decreasing downwards as per the rank of senior civil servants and is limited to only senior bureaucrats.

The minister clarified that this proposal to delink the duty free shops had been there for quite a while but this cabinet decided to act on it.

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