Electronic tax

Tax revenue will increase by 25%

Thukten Zangpo

Tax revenue is expected to increase by 25% in this financial year (FY) compared to the previous financial year, as evidenced by the Royal Monetary Authority (RMA) 2021 annual report.

The projection was based on the technical coordination committee of the macroeconomic framework of the Ministry of Finance in October 2021.

In monetary figures, this would amount to approximately Nu(B)25.83 billion, exceeding the tax revenue of the previous financial year.

In the financial year 2020-2021, tax revenue collected amounted to Nu 20.66 billion or 11.7% of Gross Domestic Product (GDP), a decrease of 9.4% from the previous year. ‘Previous exercice. Of the total domestic revenue, tax revenue accounted for 57.6%.

“With the acceleration of government investment activities, economic activities are expected to pick up in various sectors, contributing to the growth of tax revenue,” the RMA said.

He added that economic activities are expected to resume, including tourism receipts (sustainable development and visa fees) due to mass vaccination and reopening of the economy in a calibrated manner.

The collection of hotel sales tax, airport tax, corporate income tax, and tourism and related business income tax is also expected to gradually improve.

The RMA further projected that tax revenue would increase by 13.3% of GDP in FY 2022-23 and 13.9% in FY 2023-24.

The growth in tax revenue would increase domestic revenue, which would reduce the budget deficit.

The Constitution stipulates that the government must meet the cost of recurrent expenditures from the internal resources of the country.

The Ministry of Finance has estimated a resource of Nu 55.24 billion for the next financial year 2022-23, of which Nu 36.37 billion is estimated from domestic revenue and Nu 18.87 billion from grants.

With budget expenditure estimated at Nu70.92 billion, Nu36.37 billion would be as recurrent budget and Nu34.55 billion as capital budget for the financial year 2022-23.

The ministry projected a budget deficit of Nu 15.69 billion (7.54% of GDP) for the financial year 2022-23, which would be financed by external and domestic concessional borrowing.

During the last fiscal year 2020-21, the decline in tax revenue from corporation tax (IRS), business income tax (BIT) and personal income tax has affected tax revenue, the RMA said.

The drop in the BIT is due to various containment measures and restrictions imposed on the transactions of goods and services.

The deduction of the CIT from 30% to 25% and the deferral of the CIT resulted in a decrease in the income of the CIT.

The tax deferral benefited 332 CIT taxpayers and 16,764 BIT taxpayers.

To ensure uninterrupted imports and supply of essential items, sales tax and customs duties were also deferred in the same fiscal year.

According to RMA, the budget deficit for the financial year 2021-22 is expected to remain at 8.6% of GDP, with total budget expenditure expected to increase by 4.4% (Nu 73.92 billion) compared to the previous year.

To recover tax in the 2021-22 financial year, the Ministry of Finance has asked all property owners to correctly report annual rental income when filing personal income tax for the year. 2021.

Understatement, misrepresentation and non-declaration of import and export shipment is a criminal offence.

The Ministry of Finance has asked importers and exporters to refrain from such practices.

The Ministry of Revenue and Customs is expected to offer the Bhutan Integrated Taxation Systems and Goods and Services Tax (GST) software by July this year to plug tax leaks.

The government hopes to recover additional revenue from Nu 3B with the introduction of the GST.