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KP Sharma
This week, the government and political parties have been responding to widespread public concern about recent increases in car prices.
The government has now concluded its investigation into the matter and revealed more information about the root causes of the price increase.
Finance Minister Lekey Dorji announced at a press conference yesterday that a multi-departmental committee had determined that there would be no tax increase on vehicles with a displacement of 1,000 cc or less.
However, for vehicles with a capacity of up to 1,200 cc, the price has soared from N57,000 to N200,000.
Leonpo Doji said the sharp price increase could not be attributed solely to changes in tax policies.
The minister clarified that even if the government lowers taxes, it may not lead to a drop in car prices as there are other factors at play. These include freight rates, environmental standards, currency fluctuations and car model specifications.
Former Finance Minister Namgay Tshering and former DNT MP Kinley Wangchuk expressed similar views on social media.
Namgay Tshering said that while the government did increase taxes on some vehicles, this did not apply to vehicles with engine displacement between 1,000 and 1,200 cc. He said there was no increase in taxes on public-purpose vehicles like Boleros and pickup trucks.
Wangchuk added that the tax increase implemented by the previous government was for vehicles with a displacement of more than 1,200 cc, targeting high-income people. In contrast, the tax on vehicles for middle- and low-income people remained unchanged.
The previous government will keep the tax rates for vehicles between 1,000 and 1,200 cc unchanged at 45% customs duty (CD) and sales tax (ST) and 10% green tax (GT) in 2022. However, the tax rates for vehicles between 1,200 and 1,500 cc will be increased. CD will go up from 45% to 50%, ST from 45% to 60%, and GT from 10% to 20%.
Jinliwangchuk believes that the recent price increase may be due to rising source costs identified by the multi-department committee, as well as higher profit margins for domestic car dealers.
In line with this, Druk Thuendrel Tshogpa (DTT) also highlighted the role of dealers in pushing up prices, although dealers themselves denied this and attributed the cost increase to an increase in source charges.
The DTT proposed a solution that would allow individuals to purchase vehicles directly from manufacturers after paying the appropriate taxes, aiming to reduce costs and increase transparency in the pricing process.
A former lawmaker attributed the recent rise in car prices to the disruption in car supply caused by the ban, followed by increased demand after the ban was lifted.
He believes dealers may be taking advantage of the situation to maximize their own profits, especially after the difficulties they experienced during the suspension.
Inflation, which affects raw material and production costs, is a potential factor affecting car prices in Bhutan even in the absence of local tax changes.
The government decided to lift the ban on cars after consultation with the Royal Monetary Authority of Bhutan. Finance Minister Reki Dorje explained that the decision was aimed at stimulating economic activity despite limited foreign exchange reserves.
He assured that any further decisions would be based on economic analysis rather than political motivations.
Responding to the Opposition’s call to review the tax in the winter session of Parliament, the minister said such revision would depend on a reassessment of the macroeconomic situation.
Prime Minister Tshering Tobacco stressed that previous tax increases were implemented after careful discussions in Parliament and assured that the government would review the rationale of these taxes before considering any changes in future sessions.
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