Bhutan expects its domestic revenue to rise by nearly 10 per cent in the next fiscal year. According to the Budget Report for 2026-27, the government plans to collect just over Nu 77bn, about Nu 7bn more than this year.
Most of the increase is expected to come from two areas – indirect taxes and non-tax revenue.
The new Goods and Services Tax, or GS, introduced in January this year, is projected to bring in about Nu 14.18bn in its first full year. Together with the excise tax, the wider goods-and-services tax category is worth around Nu 16.9bn.
In the non-tax revenue, a large share will come from higher dividends paid by Druk Holding and Investments, the government’s holding company. Many state-owned enterprises, especially in the energy, finance and telecom sectors, are expected to perform better and earn higher profits, and they pass a portion of those profits to the government as dividends.
Hydropower will add to this. The 1,020-megawatt Punatsangchhu-II project is expected to transfer higher profits to the government. India and Bhutan recently agreed on an export tariff of Nu 5.10 per unit, which is the highest yet for a hydropower project in Bhutan. The plant is expected to generate around 4.5 billion units of electricity a year, most of it exported to India.
Higher trade is also expected to lift customs duty, growing electricity exports will raise royalties, and more tourist arrivals are projected to bring in more revenue through the Sustainable Development Fee, visa charges, and tourism services.
Direct taxes, the taxes on company profits and personal income, are expected to grow more slowly. The government has cut corporate income tax rates, reworked personal income tax slabs, and removed the tax on dividends passed between companies.
These measures, the government says, should encourage investment, leave people with more to spend, and strengthen the private sector. Its calculation is that giving up some tax now will pay off in faster growth later.
However, at the national level, what the government collects still falls well short of what it plans to spend. The total expenditure for the year is estimated at Nu 135.5bn.
The budget report also projects external grants to increase by about 20.8 percent, from Nu 25.4bn this fiscal year to Nu 30.7bn in 2026-27. According to the report, the fiscal deficit is expected to be at 6.5 per cent of the GDP.
Passang
Edited by Sonam Wangdi
