News

News and Press Release from Ministry of Finance

Launching of PPP Policy 2016 and Rules and Regulations 2017 (15-Sept-2017)

Press Release
Launching of Public Private Partnership (PPP) Policy 2016 & PPP Rules and Regulations 2017

The Public Private Partnership (PPP) Policy 2016 and PPP Rules and Regulations 2017 was officially launched by the Hon’ble Finance Minister on 15th September, 2017 in the Ministry of Finance, Tashichhodzong. This Rules and Regulations will contribute towards improving socio-economic development of the country.

The Royal Government of Bhutan recognizing the importance of investment in infrastructure to accelerate socio-economic development has embarked on promoting Public Private Partnership (PPP) as a key strategy for achieving sustainable economic growth. Considering the substantive role played by PPP in harnessing private sector investments and their operational efficiencies, the Government has approved the PPP Policy in 2016.

Public Private Partnership (PPP) is a long term arrangement between public and private sectors to leverage private sector resources and expertise in meeting the growing demand of infrastructure development, though shared risk and resources.

The PPP Policy 2016 provides a structured, transparent and institutionalized approach to PPPs – establishing uniform procedures across various sectors and ensuring fair and equal access to PPP projects. It covers all infrastructure and services that are affordable to the Government, end-users and represent Value for Money. Further, it supports the development of viable and feasible projects as PPPs that shall offer reasonable returns to the private sector, better service delivery options for the citizens, while protecting the Government from fiscal risks.

Accordingly, to operationalize the PPP Policy, the MoF formulated PPP Rules and Regulations 2017, in close consultation with key stakeholders with an objective to provide more specific guidance in designing and implementing PPP projects. These Rules and Regulations shall establish an enabling environment for private investors to participate in PPP projects with transparent and streamlined process.

These PPP Rules and Regulations shall be applied to all new projects being planned or solicited for development through the PPP model.

The Royal Government in order to effectively facilitate the implementation of PPP program has established a PPP Unit under the Department of Macroeconomic Affairs, Ministry of Finance in the Year 2016.

Press Release on Launch of Official Credit Card (8-Sept-2017)

1. Hon’ble Finance Minister, Lyonpo Namgay Dorji launched the Official Credit Card for the budgetary bodies on September 8, 2017 at the Tashichhodzong, Thimphu.

2. The introduction of Official Credit Card for budgetary bodies is one of the many new initiatives undertaken by the Ministry of Finance to digitalize the payment systems. The objective of the Official Credit Card is to make the Government payments outside the country more convenient and efficient. Further, it is also aimed at supporting the Government’s initiative of moving towards cashless economy.

3. The Government payment outside the country using the Official Credit Card is expected to reduce the processing time and administrative costs as the transactions would be on real-time.

4. This will reduce the risk of carrying cash advances by officials on travel abroad and also it will facilitate in availing prompt services through the online payment system.

5. In the initial phase, the use of Official Credit Card will be piloted in selected budgetary bodies.

6. Based on the experience during the pilot phase, the Ministry of Finance will gradually implement the use of Official Credit Card in other budgetary bodies.

Press Release on Launch of Fuel Card for Government Pool (18-Aug-2017)

1. Hon’ble Finance Minister, Lyonpo Namgay Dorji launched the use of fuel card/debit card for Government pool vehicles using Wi-Fi Point of Sales (POS) on August 18, 2017 at Tashi Petroleum Distributor, Motithang, Thimphu.

2. The introduction of fuel card /debit card for Government pool vehicles is one of the many initiatives undertaken by the Ministry of Finance to digitalize the systems with the broad objectives to better manage the Government cash flows and to support the Government’s initiative of moving towards cashless economy.

3. This initiative is also to complement the Wi-Fi POS launched on 15th June, 2017 by the RMA in collaboration with the Bank of Bhutan Ltd. and the Department of Trade, MoEA for the use of Fuel Card/Debit Card for vehicles.

4. There are a total number of 2,195 pool vehicles across the Government agencies and about Nu. 300 million is provided for ‘maintenance of vehicles’ annually. Out of the total maintenance budget, about 70% of the budget is used for POL expenses.

5. This electronic system is expected to facilitate in proper monitoring of the usage of POL for all government pool vehicles and ultimately help to reduce the administrative burden to all government agencies.

6. In the initial phase, the use of fuel card/debit card will be piloted in selected government agencies for dedicated pool vehicles.

7. Based on the experiences during the pilot phase and also with the roll-out of POS by the banks in other Dzongkhags, the Ministry of Finance will gradually implement the use of POL fuel card/debit card in other budgetary bodies and Dzongkhags.

Press Release on Fiscal Incentives (16-Aug-2017)

Background: Fiscal incentives (FI) generally refer to temporary exemption of taxes and duties or granting income tax holidays for boosting private sector development and attracting foreign direct investment (FDI) to achieve broader economic development goals. Fiscal incentives are targeted to sectors that have potential for growth, export and employment generation amongst others. As permitted by the existing laws, the Lhengye Zhungtshog approved series of tax incentives as follows:

1. Tax incentives and rules thereof 2002
As authorized by the Income Tax Act 2001, MoF announced the first set of comprehensive fiscal incentive in the form of Tax incentives and rules thereof on 13th September 2002 to stimulate private sector growth and employment generation. Tax incentives in the form of tax holidays were granted to manufacturing entities, IT and Vocational institutes, Hotels, schools and auto-mechanical workshop in the interior regions. Exemption from BIT/CIT on all export earnings in convertible currency by manufacturing industries, IT service industries and Agriculture produce exporters and 20% re-investment allowance for incorporated companies were also included. Under the same notification, export tax on cash crop was abolished with effect from 1st July 2002. The tax holidays were available for business units starting commercial operation between 1st Jan 2003 and 30th June 2007. Since FI 2002 expired on 30th June 2007, industries starting commercial operation between 1st July 2007 and 31st December 2009 were granted tax holidays with effect from 1st January 2010 for the remaining period only as per FI 2010.

Besides, indirect tax exemption on plant and machinery and raw materials have been provided as per the Rule No. 1.3 (Plant & Machinery) and Rule No. 1.4 (Raw Material) of the Rules on Sales Tax, Customs and Excise Act 2000 as authorized by Section 3, Chapter 2, Part I of the Sales Tax, Customs and Excise Act 2000.

2. Fiscal Incentives 2010
Based on the Economic Development Policy 2010, Fiscal Incentives 2010 was announced on 2nd April 2010. It was submitted to the 5th Session of the 1st Parliament on 25th June 2010 by way of information together with the National Budget Report for fiscal year 2010-2011. Additional list of items for exemption for hotel industry was approved in April 2013. Fiscal Incentives 2010 provided 56 incentives, of which 20 incentives expired as of Dec 2015 and 36 incentives are being continued under FI 2016.

Total estimated revenue forgone through the implementation of the Fiscal Incentives 2010 for the period 2010 to 2015 was around Nu. 4,893 million. This also includes Nu. 186.59 million on account of ST and CD exemption for Hotel industries granted from 17th April 2013 till 31st Dec 2015.
Total estimated revenue foregone from 1st Jan 2016 to 7th May 2017 through Sales Tax and Customs Duty exemptions on plant and machinery, raw materials, primary packaging materials and adventure tourism equipment which is valid until 31st December, 2019 as per Fiscal Incentives 2010 is around Nu. 1,104.68 million.

3. Fiscal Incentives 2016
Based on the Economic Development Policy 2016, the Government had approved the fiscal incentives 2016 with the objective to stimulate economic growth, foster private sector development and generate employment. The Fiscal Incentives 2016 was announced on 4th April 2017 with retrospective effect from 1st January 2016.

Fiscal Incentives 2016 includes tax holiday, reinvestment allowance, income exemption, exemption of tax deduction at source (TDS), additional expenditure deduction, tax rebate and sales tax and customs duty exemptions. There are 60 different types of incentives under FI 2016, of which 36 incentives are the continuation from the FI 2010 and 24 are new incentives (9 direct tax incentives & 15 indirect tax incentives). FI 2016 was submitted to the 9th Session of the 2nd Parliament along with the National Budget Report for FY 2017-18 by way of information.

The National Assembly, after lengthy deliberation on the Fiscal Incentives 2016, which was tabled as a report, resolved to process the Fiscal Incentives as a Money Bill. The Government, considering the long-term interest of the country and also to promote transparency for granting fiscal incentives, tabled the Fiscal Incentives Bill 2017 on 5th June 2017 which was accordingly passed by the Parliament. This has set the highest standard for granting fiscal incentives as a money bill in the future.

Since the Fiscal Incentives Bill 2017 will be effective from 8th May 2017, the Hon’ble Speaker stated that if the need arises, the Parliament could consider requesting the Supreme Court’s interpretation with respect to the issue of incentives granted prior to 8th May 2017. Total estimated revenue foregone for the period April 2010 to December 2015 was Nu. 4,893 million. Similarly the revenue forgone for the period 1st Jan 2016 till 7th May 2017 is Nu 1,147.04 million. Of which Nu.1,104.68 million pertains to FI 2010 and Nu. 42.36 million is on account of new incentives granted under FI 2017.

4. Benefits of FI 2010
Of the hotels that availed incentives, 76 hotels have already contributed Nu.581.38 million in terms of Sales Tax on sales of food, beverages, room and other hotel services for the period 2010 to 2015. Under direct tax, a total of 116 taxpayers availed tax holidays and under indirect tax, a total of 545 entities representing different sectors availed ST and CD exemptions under FI 2010 for the period 2010 to 2015. The total employment generated as on 31st December 2015 (cumulative) was 5649 jobs.

5. Review of tax exemption provisions
With the resolution to process fiscal incentives as money bill, the Lhengye Zhungtshog had decided to review all legal provisions which empowers the Government to grant fiscal incentives. In this connection Lhengye Zhungtshog had decided to submit the proposal for amending the following laws to the upcoming session of the Parliament as urgent bills:

1. Income Tax Act 2001: Chapter 3, Section 8, Part I and Chapter 3, Section 9, Part II states that “On satisfaction and in the public interest, the Ministry may grant exemption and tax holidays to certain companies and businesses”.

2. Sales Tax, Customs and Excise Act (STCEA) 2000: Chapter 2, Section 3.2 Part I states that “on the satisfaction and in the public interest, the Ministry of Finance may exempt a person from payment of Bhutan Sales Tax”. Chapter 3, Section 5.2 Part II states that “on the satisfaction and in the public interest, the Ministry of Finance may exempt a person from payment of Customs duty”.

3. Customs Act 2017: As per Chapter 6, Section 47 of the Customs Act of Bhutan 2017, recently passed by the Parliament (9th Session) states that “The Ministry may exempt a person from the payment of Customs Duty in accordance with:

  • The relevant international law, convention, covenants ratified by the Parliament;
  • Any other laws in force;
  • The social, environmental and economic policies of the Government.”

4. Any Act that has provision for tax exemption such as Civil Society Organization Act 2007, Religious Organization Act 2007, Parliamentary Entitlement Act etc.

Conclusion
For a developing economy, with limited domestic productive capacity, fiscal incentives will continue to play a pivotal role in strengthen economy by boosting private sector growth and attracting FDI. In view of the importance attached to the fiscal incentives, the Lhengye Zhungtshog decided that Fiscal Incentives must be processed as money bill as per resolution of the 9th session of second Parliament. In order to ensure that all laws are consistent with the decision, the Lhengye Zhungtshog has decided to propose the amendment of all the laws that empower the Government to grant fiscal incentives as urgent bills in upcoming 10th Session of the Parliament.

Furthermore, Lhengye Zhungtshog requests the Hon’ble Speaker of the Parliament to consider seeking the Supreme Court’s interpretation with respect to the issue of fiscal incentives granted prior to 8th May 2017.

With the submission of the Fiscal Incentives 2017 as money bill, the Government has paved the way for a Parliamentary debate in deciding the fiscal incentives to be granted. This is expected to ensure that fiscal incentives are provided in the priority sectors where there is potential for private sector growth, while eliminating potentials for vested interest and policy corruption.

APA 2017-2018 Signing (11-Aug-2017)

Annual Performance Agreement signed between Hon’ble Prime Minister and Ministry of Finance.

The signing of Annual Performance Agreement for FY 2017-18 between the Hon’ble Prime Minister and Minister of Finance took place on 11th August 2017 at the Royal Banquet Hall.

The Annual Performance Agreement between the Hon’ble Finance Minister and the Finance Secretary and between the Finance Secretary and heads of Departments/division were also signed in presence of Hon’ble Prime Minister. Hon’ble Finance Minister highlighted some of the targets in the Ministry’s APA and reiterated Ministry’s commitment to achieve them.

Hon’ble Prime Minister commended the Ministry of Finance and its officials for working hard and achieving goals and objectives of the 11th FYP.

APA Signing with DNB Director & Finance Secretary

APA Signing with DMEA Director & Finance Secretary

APA Signing with DRC Director & Finance Secretary

APA Signing with DPA Director & Finance Secretary

APA Signing with DNP Director General & Finance Secretary

APA Signing with DoS Director & Finance Secretary

APA Signing with PPD & Finance Secretary

APA Signing with IA & Finance Secretary

APA Signing with CCA & Finance Secretary

APA Signing with AASBB & Finance Secretary

Excise Duty Refund (27-Jun-2017)

PRESS RELEASE

The Government of India released the Excise Duty Refund (EDR) claim for the year 2015, fund releases for two Project Tied Assistance Projects and 4th qtr release of Programme Grant amounting to Nu. 2,916 million, Nu. 513.885 million and Nu. 425 million, respectively, today.

Out of the total released amount, Nu. 2,208 million pertains to the imports made from the factory, and Nu. 707.9 million for the imports made from open market. The EDR claim for the year 2015 constitutes about 10% of the total revenue for the financial year 2016-2017.

The EDR claim for 2015 was verified in June 2016 by a five – member delegation from Government of India, lead by Mr. Mahender Singh, Director General, Directorate General of Performance Management (Customs, Central Excise and Services Tax) Central Board of Excise and Customs, Ministry of Finance.

The Government of India refunds the Excise Duty on annual basis as per the Article VIII of the Bilateral Trade and Transit Agreement, which states that “Each of the Government agrees to provide appropriate refund to be mutually decided annually in respect of the Excise Duty on goods of its origin exported to the other”. Nevertheless, as a goodwill gesture of the Government of Peoples Republic of India, the central excise duty component on our imports is refunded to RGOB on annual basis.

Government of India has committed Nu. 45,000 million in the 11th FYP to Royal Government of Bhutan . The detail break-up of the commitment are: Nu. 28,000 million for Project Tied Assistance (PTA), Nu. 8,500 million for Program Grant (PG) and Nu. 8,500 million for Small Development Projects (SDP). As on date, Government of India has released Nu. 17,541.870 million for GoI PTA projects, Nu. 6,800 million for Program Grant and Nu. 7,150.253 million for SDP to RGoB. In total, GoI has released Nu. 31,492.123 million to RGoB which is 70% of total committed allocation in the 11th Five Year Plan Period. In addition to the commitment of Nu 45000 million, Government of India has also committed for a Economic Stimulus package (ESP) of Nu 5000 million to Royal Government of Bhutan, of which Nu 4400 million has been released so far.

SASEC Finance Ministers Meeting

The Hon’ble Finance Minister along with the senior officials from the Ministry of Finance attended the SASEC Finance Ministers’ meeting on 3rd April, 2017 in New Delhi. During the meeting one important document “The SASEC Vision Document” was launched and a Joint Ministerial Statement was made by the Hon’ble Finance Minister of India on behalf of the SASEC Finance Ministers.

Bhutan Development Policy Credit

PRESS RELEASE
Loan Signing on March 10, 2017

The Royal Government of Bhutan and the World Bank signed today the Second Fiscal Sustainability and Investment Climate Development Policy Credit (DPC2) of US$24 million, which will help improve fiscal sustainability, access to finance, and investment climate.


Bhutan has made impressive progress in poverty reduction and economic growth over the past decade. At the same time, high levels of investment in the hydropower sector have increased pressures on the country’s fiscal balance and external accounts.

The credit was signed by Lyonpo Namgay Dorji, the Royal Government of Bhutan’s Finance Minister, on behalf of the Royal Government of Bhutan, and Mr Yoichiro Ishihara, Resident Representative for Bhutan, on behalf of the World Bank.

This credit is the second of two operations to support Bhutan’s Eleventh Five-Year Plan (11th FYP) (2013–2018) goals of promoting green socio-economic development and achieving self-reliance. DPC2 was approved by the Board of Executive Directors of the World Bank on December 21, 2016.

INTERNATIONAL CUSTOMS DAY CELEBRATION

Internationally, 26th January is celebrated as an International Customs Day (ICD) under the auspices of the World Customs Organization (WCO) since the Convention establishing the Customs Co-operation Council was officially inaugurated in Brussels on 26th January 1953. Subsequently, the Customs administrations of WCO member States organize various national events during the ICD. The WCO on its part dedicates an annual theme that is officially declared on the ICD and the theme for 2017 is “Data Analysis for Effective Border Management”.

Data is generated by every economic activity, including the movement of goods and people and circulates extensively along the global value chain. Collecting and analyzing data to enhance the effectiveness of border management is of paramount importance to Customs administrations. This year, in the context of the International Customs Day, the WCO is introducing the theme “Data Analysis for Effective Border Management” to encourage the global Customs community to pursue their efforts and activities in this area.

The Department of Revenue and Customs (DRC) with effect from 2014 joined the global Customs community in formally celebrating this day. This year’s ICD celebrations main event was organized in Samdrup Jhongkhar and honored being graced by the Hon’ble Finance Minister. On this day, the DRC awarded WCO Merit Certificates to 16 best performing Customs officials as a recognition and appreciation for their hard work, dedication and integrity. The DRC also awarded certificate of appreciation top ten Personal Income Tax payers and also top ten Business and Corporate income taxpayers’ (BIT & CIT) with good compliance record and best performing business entity. The Department also launched the publication of Bhutan Trade Classification, Customs Tariff and Sales Tax Schedule, 2017 edition on this day.

Considering the theme for 2017, Hon’ble Members of Parliaments, senior executives of the Ministry of Finance, senior officials of the DRC from other regional offices, relevant stakeholders, border enforcement agencies and cross-border Customs officials of India, also joined the celebration.

Customs WCO Certificate Awardees with HFM and FS

RRCO SJ Service Medal Awardees with HFM & FS

TOP 10 PIT-BIT-CIT Awardees with HFM and FS

TOP PIT Payer

Launch of BTC 2017

Launch of Economic Early Warning System

Press Release on the Launch of Economic Early Warning System

The Hon’ble Finance Minister, Lyonpo Namgay Dorji launched the Economic Early Warning System for Bhutan. Also present were Cyn-Young Park (Director, ADB), Yoichiro Ishihara (Resident Representative, World Bank) and officials from ADB, the Ministry of Finance and other key economic agencies.

Hon’ble Finance Minister and Cyn-Young Park (Director, ADB) lunching EWS

The development of an Economic Early Warning System (EWS) for Bhutan is one of the initiatives undertaken towards strengthening macroeconomic monitoring and surveillance in the country. The economy’s long term growth prospects of becoming more resilient to adverse economic shocks and being informed of increases in the level of exposure to these shocks is a prerequisite to achieve a sustainable economic growth. Strengthening macroeconomic monitoring and surveillance is crucial to ensure both short and longer term macroeconomic stability which is a key objective of Bhutan’s guiding policy founded on the principles of Gross National Happiness.
An early warning system (EWS) is a mechanism that captures symptoms of any event that is adverse to the economy in advance and can be used to track economic crisis, thereby signaling future crises. It constitutes important tool for authorities to implement optimal policies to prevent or at least attenuate the impact of an economic turmoil. To predict a crisis, policy makers must understand its potential causes and the development of EWS, tailored to Bhutanese economy is expected to assist in timely detection and mitigation.

Hon’ble Finance Minister with the participants of the familiarization workshop


The system has been developed through the joint collaboration between the Asian Development Bank and Knowledge Sharing Program, the Republic of Korea.
Two day familiarization workshop on EWS was also organized for the members of Macroeconomic Framework Coordination Technical Committee (MFCTC) following the launch.

Press Release on FRR 2016

PRESS RELEASE

The Financial Rules & Regulations (FRR 2001) which was implemented with effect from July 2001 has now been revised and will be termed as Financial Rules & Regulations 2016 (FRR 2016). The FRR 2016 has been launched by the Hon’ble Finance Secretary on 27th December 2016 during the Annual Financial Workshop which was themed as “Towards Achieving Excellence in Financial Management”.

The FRR has been revised in accordance to the Public Finance Act; the web based Budgeting and Accounting Systems (MYRB & PEMS) and various circulars and guidelines issued by the Ministry of Finance. In the revised
manual, the accounting, budgeting and reporting systems have been simplified and redundancies have been removed making it more dynamic and user friendly.