Increase of Personal Income Tax (PIT) Slab and its Impact to the nation.

With the approval of increase in the slab for PIT by the National Assembly of Bhutan from initial amount of Nu.100,000 as basis exemption, it has now revised to Nu.200,000 with effect from 7^th July 2016 as reported in Revised Taxes and Levies Act of Bhutan, 2016 (2016, p. 9).

The increase in the slab rate came as the much awaited decision from the National Assembly of Bhutan giving an opportunity save an extra amount. The increase in the slab rates comes with both advantage and disadvantage to the country. Around 46,105 taxpayers will be benefiting from the tax exemption, however it will cost the country to lose up to 484 million of ngultrum as forgone revenue (Dolkar, 2016).

With the increase in the slab rate, an individual will not file their personal income tax return if their annual earnings do not exceed Nu.200,000. On the other end, the tax rate will remain same as it is now. Income with Nu.200,000 to will 250,000 will have 10% as tax rate, 15% for Nu.250,001 to Nu.500,000, 20% for Nu.500,001 to 10,00,000 and 25% for Nu.10,00,000 and above. It is also informed by the Prime Minister that the increase in the slab rate comes after 15 years of its implementation and it would mean a lot to the lower income brackets. Bhutan’s current slab rate is also the lowest income tax slab in the region as reported by the Finance Minister.

The purpose of increase in the slab rate was also to cope up with the current inflation rate of Bhutan which stands at 3.31 % in the second quarter of 2016 as reported in the trading economics (2016). There is also an increase in the amount of education allowance expenses from Nu.50,000 to Nu.150,000 beside the increase in PIT Slab giving lesser final tax liability for the tax payers. Beside the financial benefits the taxpayers would enjoy, it would also reduce the work load for the tax officials while carrying out both self and desk assessment. The decrease in the work load will have positive influence with increase efficiency in their service delivery.

References: 

Dolkar, D. (2016, June 9). Business Bhutan. Retrieved from www.businessbhutan.bt: https://businessbhutan.bt/pit-revision-to-cost-government-nu-484mn-a-year/

National Assembly of Bhutan. (2016). Revised Taxes and Levies Act of Bhutan. Thimphu: National Assembly of Bhutan.