Voucher tax removal to cost govt Nu 195 mn in annual revenue

Mobiles to be around 30% cheaper and hybrid vehicles vehicles to have 50% less tax

The Tax (Amendment) Act 2020 of Bhutan saw the controversial five percent voucher tax being removed and there was much appreciation from the public.

However, the government will be taking a large annual revenue hit of Nu 195 mn a year.

Also, while many appreciated the removal of the 2014 Tax they questioned why the government is increasing the tax for postpaid users to seven percent. There is also a seven percent tax on tourist sims.

Many declared in the social media that they would simply switch their post paid connections to pre-paid now.

There were those also who felt that pre-paid users actually cause more environmental pollution due to the paper vouchers. There was also a significant few who opposed the lifting of the voucher tax given the revenue loss.

The Finance Minister Lyonpo Namgay Tshering said that a survey found that Bhutan Telecom and Tashi Cell had distributed around 720,000 pre-paid sims which is large number of a population of around 700,000.

He said that those who used the pre-paid vouchers were mostly from the low income and even rural category and so the removal of the tax would help them.

On the increased 7 percent tax for post paid users, the minister said that the 7 percent is in line with the GST flat rate of 7 percent and it was also felt that those using post paid connections are more well off and also institutional users who can afford to pay the tax.

The government also removed all taxes on mobiles and telephone sets. Earlier mobile phones had a 20 percent custom duty (CD) and 10 percent sales tax (ST). This means that mobiles in Bhutan would be cheaper by around 30 percent which would make it even cheaper than in India or Thailand where a large number of Bhutanese usually buy their phones.

Other related devices and line telephone with cordless handsets which had 10 percent CD and 5 percent ST are also tax free.

The Finance Minister said that this is in line with the government’s Digital Drukyul flagship project and commitment for a digital Bhutan. He said that many people accessed the internet through their phones for services and other functions and so it made sense to make phones cheaper.

CD and ST taxes for hybrid vehicles have been reduced by an average of 50 percent. Earlier hybrid petrol and diesel vehicles attracted a CD of 20 percent and ST of 20 percent which has been slashed across the board to 10 percent each.

The green tax rates which vary from 5 to 25 percent depending on the CC have also been cut by five percent in each category.

This is as part of the government’s push to encourage more environmentally friendly vehicles.

Energy efficient appliances like electric water heaters, electric heaters and other energy efficient devices used for domestic purposes that earlier had 10 percent CD and five percent ST are now tax free.

LED bulbs and its equivalent energy efficient bulbs which earlier had CD of 20 percent and ST of 10 percent are also tax free.

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