The Bhutanese Leading the way.
The Tax Bill of Bhutan 2022 introduced in Parliament touches a wide array of products where there are both increases and decreases (see Box 1 and 2).
When it comes to increases one of the major reasons was for promoting good health which is where items like tobacco, betel nut, betel leaves, all junk food (biscuits, noodles, chips, sweets, chocolates), fizzy drinks, fruit drinks, ice cream were taxed.
The Finance Minister Namgay Tshering said that moving forward whatever is collected from the junk food tax will be bucketed as a ‘sin tax’ which will be used for health promotion.
At the same time the move also protects the local junk food or semi-junk food industries that manufacture fizzy drinks, fruit drinks, chips, biscuits, ice cream, noodles etc.
This is also one of the reasons why imported mineral water saw a significant tax increase.
Tax was also increased on all forms of imported pork and poultry products to protect the domestic poultry industry and also the pork industry with reports of local pork farmers unable to find a market for their products.
Tax was also increased on all processed and canned meats both as a health measure and to protect the local Bhutan Livestock Development Corporation and any private players planning to get into this.
Imported ginger also saw a tax increase to protect ginger farmers while tax was increased on imported cement and furniture to protect these two industries.
“The furniture tax is to help the local producers and they should come up now. They are blaming the government saying there is not a conducive environment but now given the pricing they should come up now,” said Lyonpo.
Tax on plastics were increased for environmental reasons.
Taxes were also increased on vehicles and bikes though smaller vehicles at or below 1200 cc were spared the tax.
Dumper trucks which previously did not have taxes attracted taxes for the first time.
Here Lyonpo Namgay said, “We are trying to go deeper and rule out anomalies that were there before. Basically DCM trucks and normal trucks are taxed but dumpers were not taxed and so we have no replicated the same tax for dumpers. A truck is a truck after all.”
There has been some Green Tax increase on hybrid vehicles.
Lyonpo said Hybrid vehicles need to have minimal charges as due to our terrain it consumes a lot of fuel and so there is not a lot of fuel efficiency.
It was not all increases as the government decreased taxes when it came to essential foods.
Taxes were decreased on cooking oil, cereals like rice, lentils, milk powder, coffee mate, flour both to reduce prices and also for food security as it would allow for Bhutan to import these items from third countries in case India imposed export bans.
To encourage agriculture taxes were reduced on agricultural seeds and machinery parts.
With the aim of encouraging public transportation taxes were reduced on passenger buses.
There are complaints by some that the taxes would impact shops selling the junk food and other taxed items and also contribute to inflation.
Here Lyonpo said, “At the end of the day when you are in the business line it will not only be junk that you will be selling as there are 101 items. You can replace those unhealthy commodities with healthy items and plus you can also switch to selling these local made semi-junk products which don’t have the taxes.”
Inflation concern is not there as the reason for reducing taxes on basic commodities is to tackle inflation.
Lyonchhen Dasho Dr Lotay Tshering said, “Which political party will want to bring taxes. My trust is on the literate lot as if the literate lot feel we are stupid then so be it. Don’t criticize, upfront but understand and see the vision. I am very excited with the vision.”
Lyonchhen said this is the beginning of taxing junk food as it was never there before in terms of the sin tax principals. He said there is also an effort to give a competitive edge to local businesses. Another aim is to also reduce imports.
