Considering the fact that Business tax of the country hasn’t grown in line with the growth of business entities, Royal Audit Authority (RAA) has recommended reviewing the tax law.
Between 2009 and 2013, the number of business entities have grown from 19,062 to 28,346 while revenue from business tax has increased from Nu 707M to Nu 1.78B. The revenue’s contribution to GDP has grown only at 0.5 per cent rate.
RAA recommended that the law needs revision to ensure higher income in coming year to curtail the unprecedented growth of the country’s debt, which is expected to reach 121 percent this financial year.
The Regional Revenue and Customs Office (RRCO) in Thimphu saw 7,369 firms that delayed their registration, followed by Gelephu with 2,083 businesses. As of December 31, 2014, there are 15,609 licenses not registered for taxation.
RAA also points out that informal businesses, which are on the rise, are not under the scope of current tax law. Unless informal businesses activities are not covered by the legal and policy framework, the report stated that monitoring alone will not have an impact.
The RAA also found that there is no revenue intelligence or tax vigilance unit to monitor illicit activities, unauthorised or unlicensed imports and, undeclared income, among others. The DRC relies on information provided by tax filers in absence of such mechanism.