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KP Sharma
Amid growing public discontent over sharp increases in car prices, the former ruling Dhni Mahadev Party (DNT) has defended its tax reforms, claiming the measures are crucial in a time of unprecedented crisis.
The surge in car costs is linked to the 2022 tax amendment bill, which This has greatly affected the pricing of cars in the country. For example, the popular Alto K10 LXI, which has a cylinder capacity of 998cc, is now priced at a whopping N760,000.
The current government has distanced itself from the controversy, blaming the rise in car prices on tax reforms initiated by the previous administration.
Finance Minister Lekey Dorji said last week that the current government does not support any new tax hikes and that the increase in car prices was due to taxes raised in 2022 by the third government.
In a press release yesterday, the DNT said tax reform is necessary to address the serious challenges facing the state during his tenure.
The party stressed that Bhutan has faced a series of crises during its administration, including the COVID-19 pandemic and its subsequent economic impact, which threatened lives and livelihoods and forced the central government to make difficult decisions.
“It is our principle not to engage in political stunts, let alone attempt them in such adverse circumstances,” the DNT said, adding that its decision was driven by necessity, not political motivations.
The DNT explained that the economic impact of the pandemic, coupled with the Russian-Ukrainian war, led to a sharp increase in imports, which seriously affected the country’s foreign exchange reserves. “We are caught between a dilemma, with a rapid decline in foreign exchange reserves on the one hand and a widening trade deficit on the other,” the party said. Faced with this dire situation, the DNT implemented a ban on car imports and revised the tax bill in 2022.
In defending its approach to taxation, the DNT argued that the moves were aimed not only at raising revenue but also at modernizing the tax system.
The party cited tax cuts on essential goods and green initiatives, such as cutting taxes on hybrid and electric cars and removing taxes on mobile phones and energy-efficient devices.
The DNT said the measures were in line with the country’s vision for green growth and digital capabilities.
However, the DNT acknowledged the public’s frustration over the rising cost of cars. “We understand the general public sentiment as the cost of cars today has increased due to tax revisions, while increases in production, transportation and foreign exchange rates have also increased costs.”
The DNT also criticised the current government for lifting the ban on car imports without a thorough review of car pricing and taxation, which the party believes should have been done before lifting the ban.
The former ruling party also reiterated its belief that progressive taxation is essential for national development, noting that his tenure saw revisions to property taxes, which led to increased revenues, much of which was spent on infrastructure and services in rural areas.
“We have also wasted enough time looking back and blaming the past. This has never been the DNT’s game,” the party said, urging the government to look at the tax system from the perspective of nation-building rather than populism.
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