GST and public anger

2026-03-09 - 09:14

Though the GST is an important tax there has been a largely negative reaction to the GST in the backdrop of land tax in the past, the economy still recovering, especially for the private sector, rising cost of living, and lack of customers for businesses as many Bhutanese head abroad. The main complaint is that the tax is timed poorly as it comes at a time when the economy is not doing well and people are already hurting and is expected to push up inflation. There are also issues around the compliance burden, especially for small firms and how it will add to the red tape. The GST Act and rules also mandate large fines and strong legal action for those not filing on time. The Bhutanese asked the government given the public anger with GST what can be done to ease the lives of the public. The Finance Minister Lekey Dorji said, “It is completely understandable that many people are concerned about the cost of living and the pressures businesses are facing. Our economy is still recovering, many businesses are adjusting to a smaller domestic market as Bhutanese seek opportunities abroad, and households are managing rising expenses. These are real concerns and the Government is very mindful of them.” He said at the same time, it is important to clarify that the Goods and Services Tax (GST) is not an entirely new tax added on top of existing taxes. In most cases, it replaces the earlier sales tax and service tax system that Bhutan already had. What GST does is bring these taxes into a single, modern and more transparent system. Under the previous system, taxes could sometimes be applied at multiple stages without proper crediting, which created a “tax on tax” effect. GST removes this cascading effect because businesses can claim credit for the tax they pay on their inputs. This makes the system cleaner, more transparent and more efficient for the economy. Importantly, Bhutan has introduced GST at 5%, which is among the lowest rates by international standards, precisely to ensure that the transition does not place an excessive burden on citizens or businesses. Lyonpo said GST is also designed to be a fair form of taxation. Because it is a tax on consumption, those who consume more, both in terms of the quantity and the value of what they purchase, contribute more, while those who consume less pay less. In this way, the tax system aligns contributions more closely with spending patterns across society. “More broadly, taxation must also be understood in the context of the changing global environment. The international order is going through rapid transformation, and countries everywhere are recognizing the need to strengthen their national resilience and self-reliance. For Bhutan, this means gradually strengthening our ability to finance our own development.” He said that while Bhutan has been fortunate to receive generous support from development partners, grants can be unpredictable, and national debt is also an important consideration. At the same time, expectations from citizens are naturally increasing. People want better roads, better hospitals, quality education, reliable public services, and increasingly expect services to be delivered closer to their homes. “Taxation therefore sits at the crossroads of all these issues. It is the mechanism through which a nation collectively finances the services and infrastructure that benefit everyone. A fair, transparent and efficient tax system allows the country to invest in its future while gradually reducing dependence on external support and/or burgeoning national debt.” He said it is also natural that reforms of this scale generate strong public discussion. “Debate is healthy and reflects the fact that Bhutanese care deeply about the country’s future. At the same time, public opinion is often broader than what is visible on social media. Many Bhutanese understand the importance of strengthening national systems and appreciate reforms that aim to place the country on a more sustainable path, even if those voices are not always the most visible in online discussions.” “Ultimately, strengthening our tax system is not simply about revenue collection. It is about nation-building and shared responsibility. When everyone contributes a little through a fair and transparent system, the country gains the capacity to provide the services, opportunities, and resilience that all Bhutanese expect and deserve.” Lyonpo said they look forward to the support of every Bhutanese in taking forward and delivering a successful GST reform. He said this is a major national reform, and the Ministry of Finance alone cannot deliver it. Its success will depend on the cooperation and participation of businesses, consumers, and citizens across the country. He pointed out that in many ways, GST is not only a policy reform but also a collective national effort, and we hope every Bhutanese will play their part as responsible taxpayers and change agents in building a stronger and more self-reliant Bhutan.