Tax Reform for Sustainable Development

In a bid to bolster its taxation system and align it with modern demands, Bhutan finds itself at a pivotal juncture, contemplating significant reforms in tax policy and administration. The nation’s tax landscape, fraught with challenges in policy intricacies and technological adaptability, has prompted urgent calls for change.

The Department of Revenue and Customs (DRC) recently revealed that Bhutan, home to approximately 116,000 taxpayers, is grappling with an outdated tax regime, failing to accommodate the dynamic shifts brought about by digital assets and emerging technologies like blockchain and cryptocurrencies. As the tax-to-Gross Domestic Product (GDP) ratio hovers around 13 percent, concerns mount over the efficiency and equity of the current taxation framework.

Director General of the DRC, Sonam Jamtsho, emphasized the imperative for a revamped tax policy during a national dialogue on tax justice and enhanced compliance. Highlighting the disproportionate burden on the top 20 percent of taxpayers, Jamtsho stressed the need for equitable taxation measures, reflective of contemporary realities.

Central to Bhutan’s reform agenda is the overhaul of its Information Technology infrastructure, with plans underway to modernize tax systems and streamline online processes. The antiquated RAMIS system, long relied upon for income tax payments, is slated for replacement, paving the way for a more efficient electronic platform.

Moreover, to alleviate the manual workload on tax officers, the DRC has bolstered its workforce, allowing personnel to focus on core tax assessment and collection duties. Efforts are also underway to revise the Income Tax Act, aiming to simplify procedures and introduce provisions tailored to present-day requirements.

Beyond the confines of domestic taxation, Bhutan’s reform drive resonates with broader global agendas, particularly the Sustainable Development Goals (SDGs) outlined under the 2030 agenda. Mohammad Younus, the UNDP’s resident representative, underscored the pivotal role of taxation in fostering social cohesion and advancing economic growth.

As Bhutan endeavors to align its tax system with the SDGs, it seeks international cooperation and expertise. UNDP’s Tax for SDGs Project stands poised to offer crucial support, ranging from specialized training for tax officials to strategic workshops aimed at strengthening the nexus between tax reforms and sustainable development.

The urgency for tax reform reverberates not only within Bhutan but across the Asia-Pacific region, where achieving SDGs remains a formidable challenge. With a gaping annual funding gap of USD 4.2 trillion, effective tax policies emerge as a linchpin for bridging financial shortfalls and propelling progress towards sustainable development.

In the face of daunting odds, Bhutan’s commitment to tax reform emerges as a beacon of hope, symbolizing a resolute stride towards a more equitable and sustainable future. As the nation charts a course towards fiscal resilience, the promise of transformative change looms large, heralding a new dawn of prosperity and progress.

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