Minor adjustments to Property Tax Act but tax to remain: Finance Minister

MP Raises Concerns Over Property Tax Act Implementation

During the last question-and-answer session in Parliament, Lam Dorji, the Member of Parliament (MP) for Wamrong Constituency, raised critical questions to the finance minister regarding the implementation of the Property Tax Act of Bhutan 2022.

The act, which aims to modernize the property taxation system and enhance progressivity based on equity and fairness, came into force on January 1, 2023. However, its implementation has revealed several issues that may contradict its founding principles.

In his inquiry, MP Lam Dorji highlighted the discrepancies in the current property tax system. These include land concessions—90% for Chhuzhing (wetland) and 50% for Kamzhing (dryland)—the classification of land based on aerial distance in chiwogs (village clusters), and the treatment of land contributed for farm roads. These aspects, he argued, violate the principles of fairness and equality.

Responding to the concerns, Finance Minister Lekey Dorji acknowledged the issues and outlined the government’s approach to addressing them. He said, “We have 66,120 acres of farmland lying fallow and a significant trade deficit due to food imports, the government has introduced fiscal incentives to encourage farming as well. These include 90% concessions on Chhuzhing, 50% on Kamzhing, and 50% on traditional houses occupied by farmers. The government is also open to reviewing zoning adjustments and possibly amending the Property Tax Act, if necessary, like Prime Minister mentioned during the State of the Nation report.”

The government is considering further adjustments to green zones, red zones, and buffer zones, potentially through PAVA (Property and Valuation Authority) adjustments or amendments to the Property Tax Act.

Additionally, rural land is categorized into classes (A, B, C, D) based on proximity to urban areas, affecting property values and tax rates. This classification aims to reflect the principle that properties closer to urban centers are more valuable and should be taxed higher, ensuring equity and fairness.

The progressive tax model means those with more valuable property pay more taxes, while those without property do not pay at all. This system addresses income inequality and funds local services such as schools, health facilities, roads, and irrigation systems.

Furthermore, there is no specific tax exemption for land occupied by farm roads. Lands contributed for community farm roads are still taxed unless the private individuals update their land records with the National Land Commission Secretariat (NLCS). The government will assist affected parties in rectifying their land records to ensure fair taxation.

Lyonpo Lekey Dorji emphasized that the current property tax system is designed to be fair and equitable, making those with the ability to pay contribute more to public services. The government remains committed to addressing any inconsistencies to uphold the principles of equality and fairness in taxation.