From 2008-18, the government lost over Nu 10bn of revenue due to fiscal incentives and tax exemptions, reveals “The Fiscal Incentives and Tax Foregone from 2008 to 2018,” report, which the finance ministry released recently.
The figures on fiscal incentives were published after the opposition asked the government to “make public all the beneficiaries of fiscal incentives.” The opposition made this move following allegations against former Works and Human Settlement Minister, Yeshey Zimba.
Exemption on income and sales tax, and customs duty are considered as fiscal incentives.
The report highlights that under sales tax and customs duty exemption, Bhutan Hotels Private Limited or Le Meridian had highest total tax exemption amounting to over Nu 80m.
The second highest is the Bhutan Ventures Hospitality Limited with over Nu 25m. However, the difference in the amount of tax exemption between the two is over Nu 55m. Some 126 hotels in the country enjoyed exemption from sales tax and customs duty.
Coming to income tax exemption, Taj Tashi had the highest exemption of over Nu 7m, followed by Amankora in Punakha with over Nu 9m. Among the nine major sectors, the total tax exemption was highest for the service sectors such as Drukair, Bhutan Telecom and Bhutan Power Corporation among others. The incentives amounted to over Nu 5bn.
Fiscal incentives availed by Hotel Riverside, which belongs to the brother of the serving Finance Minister, Namgay Dorji is still under ACC investigation, states the report.
What were the allegations against the former MoWHS Minister?
The Prime Minister’s Office (PMO) accused the former minister of official misconduct and policy corruption. The allegation was in relation with fiscal incentives for tourist standard hotels enforced at the end of the previous government’s tenure. The PMO in January this year requested the Anti-Corruption Commission to investigate the case.
The DPT government had approved additional fiscal incentives titled “Revised List of Incentives for Tourist Standard Hotels” on 17 April, 2013, just three days before its dissolution to make way for the second parliamentary elections.
A press release, issued on January 26 by the PMO, stated that Yeshey Zimba chaired the cabinet meeting which approved the additional fiscal incentives. The government is also alleging that the incentives were enforced days before the erstwhile government’s dissolution to bypass reporting requirement to the Parliament.
During that time Le Meridien was under construction. The hotel is a FDI incorporated venture in partnership with Bhutan Hotels Limited, which is owned Yeshey Zimba’s daughter.
The press release specified that official records show the hotel was benefited with over Nu 76m due to the implementation of additional incentives. It also stated 92 other hotels benefited from the incentives but over 41 per cent of the total tax exemption amount went in favour of Bhutan Hotels Limited or Le Meridien.
“Lyonpo Yeshey Zimba, being one of the cabinet ministers, had wilfully failed to declare conflict of interest as required by law and has apparently committed official misconduct in leading the decision making process that has hugely benefited his family member,” stated the press release.
However, the opposition party refuted all the allegations and said this was done for “political mileage”.
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