Responding to a question on revenue foregone owing to fiscal incentives during the Question Hour session of the National Assembly yesterday, the Finance Minister said fiscal incentive is a mechanism to boost private sector growth and has benefitted many companies particularly cottage and small industries, and education, health, and agriculture sectors.
Member of Parliament (MP) from Tashichhoeling Constituency, Dil Maya Rai, who asked the question, said that big business companies who invest in millions and billions are given tax holidays and incentives. “Such tax holidays often result in big losses to the country’s economy,” she said.
She also claimed that the government lost tax revenue worth Nu 10bn annually and asked if there were any plans to reduce such losses and whether tax holidays and fiscal incentives should be done away in future.
Finance Minister Namgay Tshering said that since Bhutan is still developing and an emerging economy, fiscal incentives and tax holidays are necessary for private sector growth.
Lyonpo said that if private sector does not grow, the economy would not grow, so fiscal incentive is an instrument to drive growth in the private sector and also to create employment opportunities.
The Finance Minister added that Fiscal Incentive Act 2017 has benefited many companies like cottage and small industries, education sector, health sector, and agriculture sector.
“Though the government has forgone tax revenue worth Nu 4.4bn with the fiscal incentives Act 2017, it has gained through employment creation,” said Lyonpo Namgay Tshering. “Many youth have been employed and many new businesses have been set up and are stable.”
The fiscal incentives provided are for a certain timeframe and the incentives provided under the Fiscal Incentive Act 2017 will expire in December 2020.
Lyonpo said that after the completion of the timeframe, the government will study how the fiscal incentives have benefitted the private sector companies and decide whether or not to continue with the incentives. “If incentives were given as per the act and the law, it will benefit the people and the private sector,” Lyonpo said.
The Finance Minister also said that the government is working on major tax reforms, which will be introduced in third session of Parliament.
Dechen Dolkar from Thimphu