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Big cars, booze to cost more in Bhutan

Publication Date : 22-06-2012

 

Commodities ranging from luxury vehicles, fuel, refrigerators, alcohol, furniture, fabrics and meat will cost dearer should Bhutan's National Assembly proposal to increase their taxes come through.

Vehicles above 1,800cc (cubic capacity, which denotes the power of vehicles) will be levied an additional 40 per cent green tax.

This is in addition to the existing 45 per cent sales tax and customs duty on the same categories of vehicles, taking the total tax to 85 per cent.

Vehicles above 1,800cc include Toyota Land Cruisers, Honda CRVs and Hyundai brands of Santa Fe and Tucson.

The tax, however, is exempt for public transport buses, including utility vehicles and trucks used for the same purpose.

A vehicle above 1,800cc, costing 1 million ngulturm (US$17,500), inclusive of the existing sales tax and customs duty today would, therefore, cost 1.4 million ngultrum ($24,600) with the additional 40 per cent green tax.  In 2011, around 6,893 cars below 1800 cc were imported from India. This year, fossil fuel consumption was valued at  5.5 billion ngultrum ($96.8 million).

In 2010, Bhutanese consumption of alcohol was equivalent to 667 truck loads with each truck measuring 9,000 litres.

No sooner than the finance minister Wangdi Norbu proposed the tax yesterday at the National Assembly session, some observers said the revision did not make sense, because only foreign cars were being taxed and not Indian ones, which was contributing to the rupee shortfall.

Lyonpo Wangdi Norbu said, although it was mostly foreign cars that were being taxed, the payment for which was done in dollars and not in rupees, it ultimately helped build the reserves, which consisted of not only rupees but dollars and other convertible currencies.

“It means the same,” he said, adding if the economy had more dollars, it could be used to buy more rupees.

He said it did not mean only foreign cars would be taxed, but Indian-made vehicles falling above 1,800cc also fell into the proposed tax-hike category.

An observer said, as far as controlling rupee outflow was concerned, the revision would not help much, because more people would buy Indian cars, because they will then become relatively cheaper than the foreign ones and thus more rupee outflow.

Fuel, such as kerosene, petrol, diesel and lubricants, will also be levied a green tax of five per cent, and 10 per cent on refrigerators, freezers and air conditioners.

Lyonpo Wangdi Norbu said the rationale behind the revision of taxes on fuel was also partly because of the price differences at the border towns of India.

For example, the price of petrol in Phuentsholing was slightly cheaper than in Jaigaon, which Lyonpo Wangdi Norbu said was leading to fuel outflow.

The new tax should, therefore, balance the discrepancy.

A 50 per cent excise duty on all alcohol, domestic and imported has also been proposed.

An additional 100 per cent sales tax is also proposed on all alcohol on the existing 100 per cent.

Items, such as silk fabrics, will be liable for 10 per cent sales tax and 50 per cent customs duty.

Power chainsaws will be charged 20 per cent sales tax and 30 per cent customs duty.

Meat, fish and egg will see a five per cent sales tax.

This is the second year in a row that the government has proposed tax hikes for vehicles and alcohol.

 

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