Thimphu: Bhutan is mulling to adopt the VAT system to check "widespread tax leakages" due to the taxpayers ignorance and refusal to maintain proper accounts.

"Bhutan's existing sales tax regime is consistent and flawless but tax leakages at some selling points are widespread due to the ignorance of taxpayers," said Choyzang Tashi, director of revenue and customs.

"Despite a series of educational processes, the inability or refusal of taxpayers to keep and maintain proper accounts is siphoning off some amount of credit tax.

"At the same time, there is no culture among Bhutanese to ask for receipts when buying goods and services, unless it is an official purchase," Tashi said.

According to officials in the department, VAT will help the government to replace lost revenues from lower tariff levels due to trade liberalisation.

With success of VAT regimes in other countries, the department wants to adopt a broad effort in reviewing and contextually changing the sales tax system, keeping in mind the taxpayer culture in the Himalayan country.

"It would be able to generate more revenue to the government," Tashi said of the taxing system that involves registration of any business entity with tax exemption on goods and services that the poor can afford.

Last week, a delegation from Thailand explained and introduced the Thai experience of VAT to Bhutanese revenue officials.

Their introductory exposition focused more on an e-revenue system and VAT as a comprehensive fair tax system of universal standard.
Source : PTI