MPs who imported Prados have to now pay 50% sales tax with grace period over

The Sales Tax will be only be refunded once the Entitlement Bill receives Royal assent

According to a senior official in the Ministry of Finance, the Department of Revenue and Customs (DRC) will be asking the three MPs who imported Prado’s over a month ago, without any vehicle quota, to pay the 50 percent sales tax on the Prado. As per the new tax laws Prados attract 50 percent customs duties, 50 percent sales tax and 25 percent green tax.

The three MPs had been given a one month grace period to produce their vehicle quota exempting them from both Custom Duties and Sales Tax after they signed an undertaking with the DRC.

That time has now elapsed and the quotas are not available yet as the Parliamentary Entitlement (Amendment) Bill, passed by the Parliament in December 2014 has not yet received Royal assent. Under the Constitution His Majesty the King has the prerogative to study the Bill in detail and if need be even send it back with advice for reconsideration. This is in line with established international democratic practices where the head of state has such duties and prerogatives.

Of the three MPs, DPT MP Dupthob from Bomdeling-Jamkhar and National Council MP Tharchen from Trongsa had signed an undertaking with the DRC in mid December 2014 and PDP MP Lekey Dorji from Bardo-Trong had signed his on 20th January 2015. While the former two’s grace period expired in January itself the grace period of the latter MP expires today.

This is because the MoF has decided to go with the existing Parliamentary Entitlement Act 2008 which exempts MPs only from Custom Duties and not sales tax. Earlier in interviews to this paper some MPs had defended their decision to import Prados saying that they were doing so under the existing and unamended Entitlement Act.

The MoF in its interpretation of the existing Entitlement Act pointed out that it is silent on exempting MPs from sales tax. In fact the main reason to amend the Act was to also include exemption of sales tax for MPs.

The senior MoF official also made it clear that the ministry would not provide the MPs with any exemptions for the sales tax since they had imported the vehicles before the quota has been issued.

However, this sales tax amount will be refunded to the three MPs if and when the Parliamentary Entitlement (Amendment) Bill is given Royal assent making it a law. The new bill passed in December 2014 exempts MPs from both Custom Duties and Sales Tax.

With the three MPs all importing a VX 10 Prado each of Nu 3 mn without any quota or taxes the 50 percent sales tax will come to around Nu 1.5 mn per MP.

Interestingly the one month grace period for MP Dupthob and MP Tharchen had already expired in January but no action had been taken by the DRC.

According to the senior MoF official the DRC is now being asked to implement the law and collect the sales tax from all three MPs.

Other MPs who have ordered the Prado’s will be subject to the same laws and just get a one month grace period after which they have to pay the 50 percent sales tax.

Others, who have recently ordered their Prados, are Deputy Speaker Chimi Dorji from Lingmukha-Toedwang of the PDP, Wangdi Norbu from Bartsham-Shongphu of DPT, Khandu Wangchuk from Lamgong-Wangchang of DPT, Kinga Tshering from North Thimphu of DPT, and eminent NC member Dasho Karma Yezer Raydi. There have also been informal enquiries with vehicle dealers by more MPs.

The State Trading Corporation of Bhutan Limited (STCBL), the Toyota dealer in the country, has already ordered around 30 Prados from the Toyota company, based on orders and ‘interest’ shown by various MPs.

The senior MoF official said, “Given that three MPs have already imported their Prados it will be unfair to stop other MPs from doing so as they will question the case of the three MPs.”

He said, “The DRC Director has the prerogative to give a one month grace period and so once that is over the sales tax will be collected.”

However, the position of the MoF and the DRC that MPs can still import Prado’s custom duty free under the existing Entitlement Act is contradictory to its own actions.

This is because the MoF so far has not issued any vehicle quotas to MPs saying that the ministry is waiting for the Royal assent.

The stand of the MoF is based on the premise that any citizen can order and import any cars as long as they pay taxes.

However, this issue has been complicated by a new precedent of MPs importing quota vehicles without quota, being given a one month grace period by DRC and also even after the grace period MPs still being exempt from Customs Duties under the excuse of the existing Entitlement Act.

The Road Safety and Transport Authority (RSTA) like the DRC also made a special exception registering the vehicles of the MPs even though crucial and mandatory documents like quota letter and tax clearance certificate were missing.

According to the Sales Tax, Customs and Excise Act 2000 people will be subject to a 24 percent interest penalty for not filing taxes.

On the request of MPs, STCBL has managed to get an additional 2.18% discount for MPs from Toyota for ordering a minimum of 30 Prados. The rush of interest from MPs is also to take advantage of the currently low rate of the Japanese Yen and the very high resale value of such cars given that car taxes have been increased up to 180 percent.

Once the Entitlement (Amendment) Bill becomes law MP’s will get full custom duties and sales tax exemption with their quota and have to only pay the 25% green tax. In contrast, an ordinary citizen would have to pay around 125% in total taxes for a Prado or put simply double the amount an MP would pay for a Prado.

MPs have also been given Nu 1 mn as entitlement from the state to buy a car. This had been increased from Nu 700,000 by the 2014 Pay Revision report so that there is no need to seek allotment of government vehicles at the end of their term.

The original Pay Revision report of the government tabled in 2014 had proposed doing away with vehicle quotas for both civil servants and MPs and instead paying a lump sum Nu 160,000 per quota.

However, in Parliament MPs decided to keep for themselves unlimited vehicle quota up to a 3,000 cc vehicle which covers most SUVs and luxury vehicles. Later with the government also decided to give civil servants their vehicle quota but with the old cap of Nu 800,000.


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