tax

• Introduction to Taxation


  The government needs a huge sum of money to meet the increasing public expenditure particularly with the development concepts, such as welfare, state, and gross national happiness
• Government functions


  Perform various functions in the field of political, social & economic activities to maximize social and economic welfare like full employment, education for all, good health care, provision of safe drinking water, maintaining towns, developing new settlement zones, good governance, maintain law and order
• Public Revenue


  The resources required by the government to perform its duties and functions
• Sources of Public Revenue

  • Taxes
  • Revenue from administrative activities like fines, fees, gifts & grants
• Tax Revenue


  A fund raised through the various taxes, a major part of the government's revenue
• Taxes


  Compulsory contributions imposed by the government on its citizens/residents without any corresponding benefits or return to the taxpayer
• Quid Pro Quo


  Reciprocal mutual consideration whereby one party gives a concession to another in exchange for an equally valuable concession
• Taxes (in relation to Quid Pro Quo)


  Generally quidded non-pro quo, where the taxpayer cannot expect a direct return to the extent of his payment as tax
• Tax


  A compulsory contribution to state revenue levied (charged) by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions, to meet the expenditure which is required for public welfare
• Definitions of Tax


  • According to Prof. Taylor: "Taxes are compulsory payments to governments without expectations of direct return or benefit to the taxpayer"
  • According to Hugh Dalton: "A tax is a compulsory contribution imposed by a public authority, irrespective of the exact amount of service rendered to the taxpayer in return, and not imposed as penalty for any legal offence"
  • According to Prof. Bastable: "A tax is a compulsory contribution of the wealth of a person for the service of public power"
• Features of Tax


  • Compulsory Payment
  • No quid pro quo
  • Payment for an indirect service
  • Sacrifice
  • Paid out of Income
  • Tax payment is a personal obligation
  • Levied for public purpose
  • Not levied as a fine or penalty
  • Imposed by a government only
  • Not a debt
• Reasons for Dissatisfaction with Taxes


  • Rate of tax is too high
  • Unfair tax is collected from the peoples. Some rich people pays less tax while poor pays high and vice versa
  • Government is wasting tax money (inefficiency)
  • Government is spending money on wrong or unnecessary things
• Non-Tax Revenue


  The revenue obtained by the government from sources other then tax, the secondary sources of revenue
• Types of Non-Tax Revenue

  • Administrative Revenues (fees, fines and penalties, and special assessments)
  • Commercial Revenue (postal charges, tolls, interest on loans, profits of state undertakings)
  • Gifts and Grants
  • Deficit Financing
• Before 1960, taxes were collected in kind and in form of Labour contribution in Bhutan
• First Major Tax reform in Bhutan in 1989 to take stock of various tax measures, develop a coherent and rational tax system, and establish a system of tax in fair, equitable and efficient manner
• Second Tax Reform in Bhutan in 1992 to rationalize the Tax structure, expand the Tax base, and simplify the administrative procedures for compliance and transparency
• Department of Revenue and Customs (DRC)

  Entrusted with a mandate to mobilize domestic revenue, both tax and Non-tax revenue, conduct fair revenue mobilization and effective administration, develop trust of the taxpayer in the system, maintain efficient and effective collection and accounting of the domestic revenue
• Vision of DRC


  Contribute to nation building through the development of an effective revenue system
• Mission of DRC


  To ensure that the Tax and Customs administration has the capacity to collect taxes efficiently and effectively at minimum cost through impartial and consistent enforcement of regulations, and to provide a convenient and honest service to the taxpayers
• Introduction of a comprehensive taxation system (RAMIS) in Bhutan due to lack of uniform guidelines, accounts not submitted regularly or on time by Revenue Agencies, agencies unable to reconcile accounts, RRCO's not aware of the revenue performance of their region, and Dzongkhag wise revenue performance could not be evaluated
• RAMIS (Revenue Administration, Management and Information System) introduced in Bhutan in 2015 to replace about 460 RGR's across the nation and undergo significant changes in the revenue accounting process and procedures
• Revenue Chart of Accounts in Bhutan


  • Taxes on Income, Profits and Capital Gains
  • Taxes on Property
  • Taxes on Financial and Capital Transactions
  • Taxes on Goods and Services
  • Taxes on International Trade & Transactions
  • Other Taxes
  • Property Income
  • Social Contribution
  • Current Revenue from Government Agencies
  • Capital Revenue from Government Agencies
• Revenue Chart of Accounts


  • Taxes on Goods and Services
  • Taxes on International Trade & Transactions
  • Other Taxes
• Other Revenue


  • Property Income
  • Social Contribution
• Current Revenue from Government Agencies


  Fees and charges from government agencies and sale of produces
• Capital Revenue from Government Agencies


  • Capital Receipts (Economic Services)
• The total net domestic revenue= Nu. 39,043.073 million, (representing 13.7% of GDP)
• The net domestic revenue increased by 8.9% as compared to the previous fiscal year 2020-2021 of Nu. 35,855.445 million
• The overall tax revenue increased by 25.1% and under non-tax revenue the current revenue from government agencies increased by 15 percent
• Tax revenue collected in the fiscal year 2021-2022 was Nu. 25,843.052 million, recording an increase of 25.1 percent as compared to fiscal 2020-2021 of Nu. 20,661.765 million. It contributed 66.2 percent to the total revenue
• Tax revenue comprises


  • Taxes on Income, Profits and Capital Gain
  • Taxes on Property
  • Taxes on Goods and Services
  • Taxes on International Trade and Transactions and Other Taxes
• Under Taxes on Income, Profits and Capital Gains, the revenue collected was Nu. 13,325.760 million, with an increase of 37.6 percent as compared to previous fiscal year
• The revenue collected under Taxes on Property was Nu. 144.625 million with an increase of 4 percent as compared to the previous fiscal year 2019-2020 with the collection of Nu. 138.915 million. The overall composition of taxes on property to the total revenue was 0.4 percent
• The revenue collected under Taxes on Goods and Services was Nu. 7,452.002 million, with an increase of 37 percent as compared to the previous fiscal year. The composition of Taxes on Goods and Services was 19.1 percent to the total revenue collection
• Tax Expenditure
• Group work


  1. Prepare a presentation

  2. Presentation 8 minutes

  3. Q&A- 3 Minutes
• Group 1


  • Objectives of Taxation (At least 6 objectives)
  • Tax planning vs Tax avoidance vs tax Evasion (with examples)
• Group 2


  • Direct vs Indirect tax (with examples)
  • 4 different types of tax rates (With diagrams and examples)
• Group 3


  • Cannons of taxation ( 4 actual cannons and at least 4 additional cannons)- with examples