𝐅𝐢𝐧𝐚𝐧𝐜𝐞 𝐌𝐢𝐧𝐢𝐬𝐭𝐞𝐫 𝐑𝐞𝐯𝐞𝐚𝐥𝐬 𝐌𝐮𝐥𝐭𝐢𝐩𝐥𝐞 𝐅𝐚𝐜𝐭𝐨𝐫𝐬 𝐁𝐞𝐡𝐢𝐧𝐝 𝐕𝐞𝐡𝐢𝐜𝐥𝐞 𝐏𝐫𝐢𝐜𝐞 𝐒𝐮𝐫𝐠𝐞

…𝑳𝒚𝒐𝒏𝒑𝒐 𝑳𝒆𝒌𝒆𝒚 𝑫𝒐𝒓𝒋𝒊 𝑯𝒊𝒈𝒉𝒍𝒊𝒈𝒉𝒕𝒔 𝑴𝒂𝒓𝒌𝒆𝒕 𝑭𝒍𝒖𝒄𝒕𝒖𝒂𝒕𝒊𝒐𝒏𝒔 𝒂𝒏𝒅 𝑫𝒆𝒂𝒍𝒆𝒓 𝑷𝒓𝒐𝒇𝒊𝒕𝒔 𝒂𝒔 𝑲𝒆𝒚 𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒐𝒓𝒔, 𝑫𝒆𝒔𝒑𝒊𝒕𝒆 𝑺𝒕𝒂𝒃𝒍𝒆 𝑻𝒂𝒙𝒆𝒔 𝒇𝒐𝒓 𝑺𝒐𝒎𝒆 𝑴𝒐𝒅𝒆𝒍𝒔

By Yeshey Lhadon

Amidst mounting public concern over escalating vehicle prices, the government has revealed that taxation is not the sole factor behind the surge of vehicle price.

During the 7th Meet-the-Press Session, Prime Minister (PM), Lyonchen Tshering Tobgay and Finance Minister Lyonpo Lekey Dorji provided insights into the complex interplay of factors affecting vehicle costs and outlined the government’s commitment to a thorough review of its economic policies.

Prime Minister addressed the media, explaining that the rising vehicle prices are intricately linked to the Tax Act of Bhutan 2022, which was introduced after extensive debate by the previous government. “The Tax Act was designed to stabilize our economy, but we acknowledge that merely adjusting taxes might not resolve the issue of escalating vehicle costs,” the Prime Minister stated. He emphasized the need for a detailed assessment of whether the tax changes are achieving their intended objectives.

Finance Minister Lyonpo Lekey Dorji shared findings from a newly established multi-sectoral committee that investigated the recent price hikes. The committee compared vehicle prices from 2022 to 2024, identifying a range of factors contributing to the fluctuations.

The report reveals that while the Tax Act of 2022 maintained stable tax rates for petrol vehicles with engines under 1200cc, significant price increases have been observed for popular models. For example, the Alto K10’s price has surged by approximately Nu 57,000, while the Kia Sonet has seen a dramatic rise of nearly Nu 200,000.

Lyonpo Lekey Dorji explained, “Taxation is not the only driver of increased vehicle prices. Our committee has identified additional factors such as market price fluctuations, currency exchange rates, changes in vehicle models and features, and potential price inflation by vehicle dealers.”

Conversely, utility vehicles like the Bolero have experienced a price drop of around Nu 70,000. This decrease, despite unchanged tax rates, is attributed to model downgrades. “Utility vehicles, essential for rural areas, have seen reduced prices due to changes in model specifications rather than tax changes,” Lyonpo Lekey Dorji noted.

The report also highlights the impact of tax adjustments on larger vehicles. Despite a 30 percent reduction in taxes for 20 seater coaster buses, their prices have increased by nearly Nu 1,900,000. This rise is primarily due to changes in bus models rather than tax related factors. In an ideal situation the price of these coaster buses should be lesser by Nu 800,000. “Even with tax reductions, the prices of these buses have remained high due to modifications in the product offerings and specifications,” Lyonpo Lekey Dorji stated.

High-end vehicles with engine capacities over 1200cc, such as the Toyota Hilux and Prado, have faced increased taxes, leading to significant price hikes. The report highlight that while tax policies play a significant role, other factors like production costs, insurance, shipping expenses, and dealer margins often have a more pronounced impact on final vehicle prices.

In light of these findings, Prime Minister Tshering Tobgay stressed the importance of a balanced approach to evaluating the Tax Act of 2022. “If it turns out that the tax changes are not achieving their intended effects, we will revisit the issue during the upcoming winter or summer sessions,” he assured. The Prime Minister emphasized the need for a comprehensive analysis that considers broader economic and market factors.

In addition to addressing vehicle prices and tax impacts, the Bhutan Construction and Transport Authority (BCTA) is developing a new vehicle registration system in Thimphu Thromde. This initiative aims to streamline and improve the efficiency of vehicle registrations, following the recent lifting of the vehicle import moratorium. The new system is expected to enhance transparency and benefit both consumers and the automotive industry.

Looking ahead, the government remains committed to monitoring vehicle prices and tax impacts closely to ensure economic stability and affordability for consumers. Finance Minister Lekey Dorji highlighted the need for tax policies based on economic soundness rather than populist demands. “Our goal is to develop a tax system that generates revenue for the government while supporting the country’s developmental initiatives. Tax policies should not be influenced by populist sentiments,” he stated.

The Finance Minister acknowledged the complexities involved in vehicle taxation and pricing. “Even if taxes are reduced, vehicle prices may still remain high due to other contributing factors,” he said. “We must make professional decisions over political ones and carefully consider the long-term impact of vehicle taxation. Our approach will be guided by professional economic analysis rather than political considerations.”

As Bhutan navigates the complexities of vehicle taxation and market pricing, the government remains focused on developing policies that ensure transparency, economic stability, and affordability for its citizens. By continuing to monitor market trends and the impact of tax policies, the government aims to achieve a balanced approach that supports both economic growth and consumer well-being.

The upcoming parliamentary sessions will provide an opportunity for further discussion and analysis, allowing for informed decision-making aligned with the country’s long-term developmental goals. The government’s commitment to transparency and economic stability will guide its efforts in addressing the challenges of vehicle pricing and taxation, ensuring that policies are effective and equitable for all Bhutanese citizens.