Customs Duty revision sparks debate and friction in parliament

Some members of the National Council shared their concerns over government’s decision to revise customs duty to uniform 10 %

By Tandin Wangchuk

Notwithstanding the government’s move to levy a uniform 10% customs duty on all goods imported from third countries, some members of the NC expressed their concerns over the government’s decision.

They said this untimely move by the government might burden the foreign currency reserve and would ravage the local markets.

The issue was raised by the Finance Minister during the presentation of the Goods and Services Tax (Amendment) Bill of Bhutan 2021 and the Customs (Amendment) Bill of Bhutan 2021 this week.

Members said reducing Customs Duty will increase the import of goods which might result in a huge outflow of foreign currencies. In addition, they also expressed that domestic firms and local industries would struggle to market their products and will have to compete with international products which could be suicidal.

Finance Minister Namgay Tshering said the Foreign Exchange Rules and Regulations under the central bank will monitor foreign currency outflow and that there is a clear regulation regarding the foreign currency outflow.

Currently, the Foreign Exchange Rules and Regulations 2018 mandates individuals who take out money exceeding 10,000 US Dollars or its equivalent in foreign currency obtain clearance from the RMA and make declarations at the customs.

Lyonpo said every individual will be scrutinised by the RMA through the guidelines and regulations in place. He further said local markets will instead thrive from the reduction in customs duty after the Goods and Services Tax comes into force.

The Finance Minister added that if you look at the past records or trade statistics, about a decade ago the import of goods had never reduced, export was also not that good and it was moving at a snail’s pace.

Lyonpo Namgay Tshering said there is no concern about the impact it will have on the domestic market and that the domestic market will benefit immensely once the GST comes into force.

The Customs duty is levied at the point of entry on the goods imported from third countries and the tariff rates ranges from 0-100%. The government now plans to levy 10 % customs duty on all goods will be levied at 10% except on alcohol, tobacco products and vehicles.

Meanwhile, the National Assembly this week adopted the Customs (Amendment) Bill of Bhutan 2021.

The revision was aimed at increasing tax payment compliance, reduce inflation and make varieties of products available for consumers.

Among other ratifications, the house had discussed the proposal to introduce a flat 10 per cent Customs Duty on all goods imported from third countries. Gold and silver, alcohol, tobacco products and vehicles are exceptions.

Of the 38 members of parliament present, 32 of them voted for yes while five abstained and one voted no. The Bill, which is a Money Bill, is now with the National Council.

30% Customs Duty on the import of wood rejected

The National Assembly this week rejected the Economics and Finance Committee’s proposal to levy 30 per cent of Customs Duty on the import of Wood and Articles of Wood instead of reducing it to 10 per cent.

The exiting Duty on Wood and Articles of Wood varies from 10 per cent to 50 per cent. The committee said the reduction in duty will affect wood-based industries in the country and it also contradicts the government’s plan to export wood-based products.

The Member of Parliament of Bji-Kartshog-Uesu, Ugyen Tenzin, said he supports the reduction of customs duty as Bhutan still needed to import quality wood and wood products despite being endowed with a vast natural reserve as not everything is available and produced within the country.

“If we need quality and varied products we still need to import,” he said.

The agriculture minister Yeshi Penjor also said that if we choose to go on a commercial scale, we have to cut down all the trees in the country and because of this we won’t be able to maintain 60% of Forest Cover in all times to come as is mandated by the Constitution.

He said that Bhutan has agreed to remain carbon neutral therefore, the country cannot and do not have the means to produce everything that we need from the forests as it will affect the overall chain and the natural ecosystem.

The government had proposed to introduce a flat 10 per cent Customs Duty on all goods imported from third countries including Wood and Articles of Wood.

Meanwhile, the National Council on Thursday deliberated the Goods and Services Tax (Amendment) Bill of Bhutan 2021 and the Customs Duty Bill of Bhutan 2021 today.

The Good Governance Committee, Committee In-charge of the Goods and Services Tax (Amendment) Bill of Bhutan 2021, Sangay Dorji, acknowledged the principle and rationale of the Bill which is intended to reform the taxation system in the country.

However, the Committee reiterated on the recommendations of the 24th Session of the National Council, and expressed similar concerns over the legality of the commencement date, preparedness of the government for immediate implementation, and the need to draw a clear distinction between a Money Bill and Financial Bill.

In this regard, the Committee proposed the House to recommend the National Assembly to reconsider amendment of Section 3 of the GST (Amendment) Bill of Bhutan 2021 in order to provide adequate time for the Government to put all necessary systems in place for the smooth transition to GST system; and to urgently introduce the amendment of the Public Finance Act of Bhutan 2012.

After a thorough debate and deliberation, the House directed the Committee to re-deliberate the issues raised by the Members and submit the final recommendations for its adoption.

Further, the Economic Affairs Committee, Committee In-charge of the Customs Duty Bill of Bhutan 2021, Anand Rai, presented the government’s proposal to revise the Customs Duty (CD) multiple CD rates with 9 slabs ranging from 5-100 percent to 10% on most commodities.

While the Committee acknowledged the intent and benefits of the Bill, it felt that the revision would cause adverse impacts on the agriculture sector; small and medium enterprises; traditional handicraft industries; increase deflection of goods; deplete convertible currency reserves and our national revenue.

The Council extensively debated on both the advantages and negative impacts it would accrue to the trading system of the country. The NC re-directed the Committee to discuss the details of commodities and corresponding CD rates with other members and present the findings to the House.

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