National Revenue Report 8 March, 2010 - Domestic revenue in the first year of the 10th plan, 2008-09, amounted to Nu 14.049 bn, a Nu 1.7 bn rise from the previous year, and exceeding the revised target by more than Nu 200 mn, according to the national revenue report.

Under non-tax revenue, increases were mainly from Tala hydropower authority and from the royal monetary authority as lump sum payment of profit transfer pertaining to the previous year.

Tala contributed more than Nu 2.6 bn, an increase of Nu 861 mn, because of increased power generation through abundant water flows during the year.  Its contribution makes up almost 19 percent of total revenue.

Tax-generated revenues soared by 23.8 percent with the major increases coming from corporate income tax (CIT), personal income tax and royalty.  PIT grew by almost 46 percent to Nu 387 mn, because of the salary revision in January 2009 and the subsequent growth in the number of taxpayers.

CIT amounted to Nu 2.34 bn, a 29 percent growth.  This increase was attributed to improved performance by corporations like Bhutan Power corporation (BPCL), Bhutan Ferro alloys (BFAL), Bhutan National bank (BNBL) and Druk Green power corporation (DGPCL), which is made up of the Basochu, Chukha and Kurichu hydropower plants.

The tourism council of Bhutan was the fourth highest revenue generator, contributing 4.5 percent of the total revenue.  Royalty from tourism recorded an impressive growth of 40.5 percent with 27,636 tourists bringing in Nu 176 mn.

Revenue from government departments fell by 24.2 percent from Nu 257 mn to Nu 195 mn, because of reduced collections from cadastral survey fees and new citizenship identity card fees.  Contributions from the department of lottery also declined by 24.5 percent, because of bleak lottery market in India and expenses incurred on the lottery building.

Among the sectors, the primary sector that comprises forestry, mining and agricultural activities, saw a decline in revenue generation by 16.8 percent.  “The decline is mainly due to the decrease in contribution from NRDCL due to price regulation by the government,” the report states.

Increase in domestic sales, revision of power tariff and wheeling charges from export of power increased revenue generation for Bhutan Power by 141.2 percent, moving it up to the sixth position from tenth among the top ten revenue generation agencies.

With Nu 138 mn revenue generated, Bhutan National bank entered the top ten list this year, while Penden Cement authority limited (PCAL) saw a decline by 8.2 percent, due to the rise in cost of coal, one of the main raw materials for cement production.

The Jigme Mining company in Gomtu paid Nu 46 mn as corporate income tax, making it the highest contributor from the private sector to the national revenue in 2008-09.

It was followed by SD Eastern Bhutan coal company, which pumped in Nu 30 mn and Druk Satair corporation with Nu 26 mn.  Together with other seven top private businesses, they injected about Nu 177 million into the national revenue, an increase by 20.2 percent from the last fiscal year.  

The report states that since taxes are slowly becoming a major source of government funds, it’s important that a sound tax policy is in place to meet the increased budgetary spending.  “Therefore tax reform may be necessary to meet the increased revenue needs to support economic reforms,” the report recommends.

With works on major projects such as Punatshangchu and Dungsum cement to take off, the report states that increased collections under business income taxes or CIT is expected.  “Development of new economic activities and expiry of tax holiday periods would also lead to generation of more revenue in future,” the report states.