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Bhutan: Tax Or No Tax For Development

In the first ever Constitutional Case – two members of Opposition party vs. the Government – since it became the world's youngest democracy in 2008, Bhutan's Supreme Court delivered its final verdict yesterday in favor of the Opposition.

Bhutan is introducing more and more taxes to its people. Image by Morgan Ommer, copyright Demotix (15/02/09).

Bhutan is introducing more and more taxes to its people. Image by Morgan Ommer, copyright Demotix (15/02/09).

On 18 November 2010, Damcho Dorji, one of the only two members of the Opposition, filed the case claiming that the ruling government did not comply with the provisions of the Constitution when it decided to impose a vehicle tax under “rationalization and the broadening of the existing tax structure.” According to the complaint the government, it claimed, had gone ahead with the tax measure without the approval of Parliament violating Section 9 and 14(b) of the Public Finance Act and Article 13 and 14(1) of Bhutan's Constitution.

The Opposition asked that the taxes collected by the Government without the authorization of Parliament be returned with interest to the affected parties, and hold the Government liable for violation of their rights under Article 7(10) of the Constitution; and hold it liable for contempt of Court for suspending the import of all light vehicles without obtaining the permission of the Hon'ble Supreme Court. It also asked that the Supreme Court order the Government to revoke its circular suspending the import of all light vehicles and pay appropriate compensation to the affected parties with immediate effect.

The initial ruling in November last year favored the Opposition but on 29 November 2010, the Government appealed the case stating “Inadmissibility of the Opposition Leader to submit petition against the Royal Government.” The appeal stressed that there was an error in the interpretation of the Jabmi Act; and Constitutionality of judicial consideration of a matter under legislative process.

It also stated that there was erroneous interpretation of the Constitution and relevant laws by the Opposition, and that the case should have been dismissed by the High Court for want of legal standing. The High Court, according to the government, should also not have interfered in a matter that is already a concern of the National Assembly and as such, is under legislative consideration to be deliberated upon in the 6th Session of Parliament. It also stated that the High Court had erred in ruling that the Government has carried out taxation measures in breach of provision of laws in revising the indirect taxes, assuming (but not yielding) that the respondent has legal standing to challenge the act of the Government and that the consideration of the case by the Court is deemed not to be an act of judicial interference in the legislative process.

The Bhutanese twitter-sphere broke the news of the verdict. The Twitter account of one of the mainstream newspapers Business Bhutan said:

@business_bhutan:
Historic day for Bhutan as country's 2-member opposition wins case against the ruling government #BhutanSupremeCourt

Many seem to see this as a case in which the Supreme Court has proved its integrity, because while the tax rule was made with good intentions out of environmental concerns and to reduce pollution (taxes on plastic items, junk food, imported printed material, and alcohol, among others, were also increased the same time), it seemed to have been made in violation of the Constitutional procedures.

And although the same “mainstream” newspaper went on to call this a “Political Victory” for the Opposition Leader and detailed in rather biased tweets – the reactions of some officials of the government by saying this:

@business_bhutan
Our reporter @satkenguy informed PM that govt lost case. Lyonpo Kandu Wangchuk's face turned red. FinMin Wangdi Norbu looked cool

One exasperated response at both the Prime Minister's and the publics reaction to the verdict said:

@kuengawangmo:
Many including the PM r missing the point on the tax case-‘tax’ isn't the issue- it is the unilateral decision made by the gov.

She went on also to add that:

@kuengawangmo: Most Bhutanese will agree with the PM- about time Bhutan didn't beg and people contributed more in tax .

While the Bhutanese are pretty self sufficient in many ways, the country's development projects are largely dependent on external aid, which have been used with little or no corruption unlike many developing countries. This even earned Bhutan the name “Darling of the Donors” as many rushed to give as they saw good results and return on their money. However, the idea of citizens contributing towards this in the form of taxes is still a new/alien concept in Bhutan. The first tax (income) was introduced in 1999 and even though it was the lowest in South Asia (although some officials earn higher incomes than their counterparts in neighboring countries) this created quite a stir with people selling of shares and withdrawing their money from the banks.

It appears then that Bhutanese still have a long way to go in terms of getting used to being taxed but in this case the overriding factor was not so much the tax itself – of course people didn't want it – than the process of how the decision was made in implementing it, that was disputed.

Now that the verdict is out, Sangay Khandu, a Representative to the National Council from Gasa Dzongkhag and Member of Parliament, said:

@Sangay Khandu
The #BhutanSupremeCourt has done it's job, now it's implications remain to be felt and seen

And meanwhile Bhutanese taxpayers like Sonam Dema have something to look forward to:

@SonamDema
meanwhile recent car tax payers (including myself) are excited and looking forward to being refunded.

Whatever the case, hopefully the government will learn its lesson to follow the Constitution, and the people? That along with taxes also comes the right to demand efficiency and accountability and that really nothing comes for free, including the environment. It is just that some governments take upon that responsibility more seriously than others.

2 comments

  • The way gov. rise tax was beneficial and for sustainability of future development directly or indirectly for our own citizens but the gov. haven\t follow the constitutional norms,for that i have deep regreat.the supreme court of bhutan have settle the case through integrity,which most of us expect.at the same time thanks opposition,as they have done great job.

  • […] recent ruling by the Supreme Court on Bhutan's first Constitutional case, which was in favor of the 2 member opposition against the present government proved to the people the justice system's integrity. However, […]

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