During the Meet The Press session today, Finance Minister Lekey Dorji said that the recent increase in vehicle prices is not only due to the 2022 tax revisions. A multi-sectoral committee identified other contributing factors such as currency exchange fluctuations, shipping charges and environmental standards among others. The committee included representatives from the Royal Monetary Authority, the Department of Trade, the Ministry of Finance and the Competition and Consumer Affairs Authority.
The finance minister highlighted that not all vehicle categories have seen price increases. The committee found that while taxes in one category of buses were decreased by 10 per cent, taxes on vehicles above 1,200 cc were increased and taxes on utility vehicles stayed the same.
The multi-sectoral committee found that no taxes have been increased for vehicles below 1,000 cc. However, going by the price in the market for vehicles under 1,200 cc, prices have still surged ranging between Nu 57,000 to 200,000 despite no tax hike.
The study team also compared the selling prices of vehicles in 2022 to those currently sold. They found that prices were affected by changes in vehicle models, added features, production costs, insurance, shipping costs, currency fluctuations, and dealer margins.
“Despite no increase in taxes on vehicles below 1200 cc, three popular brands Alto K10 998cc, Wagon R 1147 cc and Kia Sonet 1197 cc saw increase in its price. For coaster bus, the tax has decreased from 40 to 30 %. As per this, the price should actually decrease by Nu 800,000. But if you look at the current price, the price has in fact gone up by nearly Nu 1.9 M. As said earlier, this change is due to change in model and features of the car.”
The most significant price hikes were seen in popular models like Toyota Hilux and Prado where non-tax-related factors contributed the most to the increase.
The study found that while tax hikes do affect vehicle prices, other factors often have an even greater impact.
“If you ask whether we can put the tax revision for the vehicle during the winter parliament, we just can’t take a political decision. We will of course be happy to decrease the tax if people are happy, but it could impact the health of our country’s economy in long run.”
The finance added that simply reducing vehicle taxes won’t necessarily lead to lower vehicle prices and that any decision on vehicle taxation will require careful consideration before being presented to the parliament.
He further added that taxation decisions shouldn’t be based on popular opinion but must be strategically designed to effectively generate revenue for the country’s development.
Meanwhile, the finance minister said that the government will look into other factors beyond taxation that are contributing to the vehicle price hike and will implement necessary policy measures to address the issue.
He further added that the government is committed to improving public transportation and public services.
Samten Dolkar
Edited by Sonam Pem
