Published On: Fri, Jul 11th, 2014

Govt decides to lift freeze on vehicle quotas

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The Pay Commission report and the Pay Revision report proposals to monetize the quota at Nu 160,000 have been dropped by the govt

In what will be music to the ears of more than 3,000 eligible civil servants, the government has decided to lift the vehicle quota freeze imposed in April 2012.
This will mean that eligible civil servants importing a vehicle will be exempt from Custom Duties and Sales Tax up to Nu 800,000 of the car’s value.
This would mean that if an eligible civil servant buys a car worth Nu 800,000 then he or she will not have to pay any custom duty or sales tax. If the car is worth Nu 1.6 mn then half the amount or Nu 800,000 will be tax free and tax will only have to be paid on the remaining Nu 800,000 that exceeds the quota bracket.
The Finance Minister Lyonpo Namgay Dorji said, “The government originally wanted to remove vehicle quotas for everyone from MPs to Civil Servants, but since MPs opted to keep their vehicle quota as per the Entitlement Act then the government felt it would only be fair to also give civil servants their quota.”
Lyonpo said the government also took this decision keeping in mind the need to keep civil servants motivated as a vehicle quota was one of the very few perks that a civil servant enjoyed.
Currently as per the Vehicle Quota Rules of 2009 any public servant or civil servant from the grade of P3A and above are eligible for the civil service vehicle quota.
The Finance Minister said that the Pay Commission report had originally recommended doing away with the vehicle quota for all categories of public servants from MPs to Civil Servants and instead giving Nu 160,000 every seven years.
He said the government’s Pay Revision report presented in the Parliament also stated the same point as the government also completely wanted to remove vehicle quotas and instead monetize them.
Lyonpo pointed out that the problem was not with the quota but its misuse by some who sold the quota and with the profit imported another vehicle resulting in the import of two vehicles from one quota.
The Minister said, “When I consulted the ruling party MPs they were ready to also give up their vehicle quota but since they are equated at the level of a Secretary they in place of the quota requested a government chauffer driven vehicle that Secretaries also get.”
The Minister said that he communicated to the MPs at the time that this would not be possible as the long term costs to the government would be much more than even the quotas.
The minister said that finally with the MPs in Parliament not agreeing to monetize the quota for themselves the government decided that it would do the same for civil servants as well.
With many under the impression that the Parliament had not discussed or deferred the vehicle quota discussion to the winter session the finance minister said that this was not the case.
“The National Assembly resolution states that the Vehicle Quota issues is actually a policy issue with existing rules in place and that the government of the day should take a decision and so the government has accordingly taken a decision,” said the minister.
The immediate beneficiary would be more than 3,000 or so civil servants who are eligible but the actual numbers could even be higher.
Since 2006 till 2012 before the ban, 3,478 quotas were allotted of which 1,571 are yet to be used (see box). There are also 437 new applicants since the quota suspension came into place from April 2012 onwards. This would mean that there are already 2,008 civil servants who are registered.
According to the Finance Ministry there are around 600 to 700 eligible applicants a year for the vehicle quota. For example 797 quotas were allotted in 2011. With many not bothering to apply after the early 2012 ban the actual eligible numbers could well surpass 3,000 civil servants.
The minister said that the Finance Ministry was in the final stages of amending a few Quota rules to bring it up to date, but he said that it would not affect that main fact that civil servants would be eligible to a quota after every seven years and that the eligible tax free amount would be Nu 800,000.
However, the finance minister also clarified that the government will also study and find out why people who applied for and were allotted quotas between 2006 and 2009 did not use them.
If the original idea of monetizing vehicle quotas were followed the immediate financial impact on the government could have been quite substantial. For example according to the MoF just monetizing the 1,571 allotted but unused quotas would have cost the government Nu 251.36 mn not to mention the other pending quotas. If it was done for more than 3,000 quotas then the cost would have well crossed Nu 500 mn for the government though it would have come down in the following years.
The Pay Commission report showed that from 2000 to 2013 there were 2,115 allotted but unused quotas and it projected around 730 applicants in 2014. The report said that for 2,115 quotas the tax revenue foregone was Nu 930.60 mn but the Nu 160,000 cash compensation would be Nu 338.40 mn.
The vehicle quota suspension was the result of a series of measures taken in early 2012 to deal with the rupee crisis which hit from late 2011 onwards.
The former government on January 2012 came up with a high level committee to study the rupee problem and possible solutions. The report submitted in March 2012 among many measures recommended doing away with the Civil Service vehicle quota saying that from 2002 to 2011 the government had given up on Nu 900 mn in taxes due to the quota.
It also pointed out that in the same period 3,121 vehicles worth Nu 2.596 bn were imported under the quota. The report said that the quota had a huge impact on rupee and convertible currency outflows and also import of fuel. It also said that quotas resulted in import of two cars due to the profit from selling one quota.
With vehicle taxes hiked from 55 percent to 180 percent the vehicle quotas would be more valuable and also allow civil servants to save more money in importing vehicles.

Tenzing Lamsang / Thimphu

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  1. Tshering says:

    Is this govt only interested in civil servant pay quotas for fews , is this govt voted only by civil servants, what about ordinary people, villagers and senior citizens…are they not citizens ….and humans…

  2. karma says:

    only MP want free , without tax. their idea is give one hand and take another hand . mp want to take as much as they can within five year of time . they [MP] knows they will not get vote at 2018 election that why they want every things free [without tax]… PDP and DPT voted by people and civil servant always remember that …..

  3. Choden says:

    I am quiet surprised when I read the article, its only mentions “civil servants”. It is a common trend which I have seen in my years of service that the corporate employees are almost and most of the time not included into picture. The MPs, NCs should remember that they didn’t get elected just because of votes from the civil servants but they have been elected based on votes from each and every single citizens of Bhutan. Pay hike is just a picture, while when one comes to ground level the pay hike is lost. Its not even been a month that fuel prices had risen because of hike in the Indian market and now we seen the fuel price up again due to the Green Tax. The Government should think for employees from various sectors and not only civil like private, corporate, contract employees etc. GNH is just a word now and with this current trend it won’t take long enough for the percentile to drop.

  4. karma says:

    all the minister/ MP go to hell …..

  5. tandin weangchuk says:

    Vehicle allowances for MPs raised from Nu.800,000 to Nu. 10,00,000. That is the differences of Nu. 300,000. But what is embarrassing is when it comes to civil servant they have limited to Nu. 160,000 which otherwise should apply uniformly. It should be either the MPs come to Nu.160,000 or the civil servants to Nu.300,000. We are deeply saddened and forced to served with all regrets.

    • Despite several appointments in media the Finance Minister failed to convince the civil servants. And then the Home Minister appeared in media explaining the financial status…… shocking to see HM not the FM. What type of government is this….. time will come when Nima Sangye Chenpo will speak on pay revision…followed by Dungyel ji….ha..ha…… what a mock govenrment

  6. zhenphendorji says:

    what makes MPs to be equated to Secretary. Why the decision has to be based on MPs. Judiciary, Legislative and Executive all 3 bodies are equally important. None can be superior.
    “The government originally wanted to remove vehicle quotas for everyone from MPs to Civil Servants, but since MPs opted to keep their vehicle quota as per the Entitlement Act then the government felt it would only be fair to also give civil servants their quota.”
    this is something ridiculous making MPs superior.

  7. leki Tenzin says:

    thansk Govt for the good decision on revamping civil servants quota whihc is one of the only few privilage available. For corporates there are things like corporate allowances and bonus etc, good decision of MoF.

  8. Dorji Duba says:

    Nu. 160000 will not be enough to cover even the taxes as taxes on cars have increased to 55%,100%, 125% and 180% by this government. Civil servants will accept money if government give them Nu. 350,000-500,000 instead of vehicle quota.

    When MPs were given money of Nu. 7 lakhs, the benchmark vehicle was Hyundai Tucson. Then in 2008, when civil servants were given quota tax exemption, it was Nu. 8 lakhs, which was to allow civil servants to at least buy Hyundai Tucson tax free. In 2014, MPs vehicle grant is increased to Nu. 10 lakhs as Tucson cost has risen. So, I think civil service vehicle quota tax exemption should be increased from Nu. 8 lakhs to 10 lakhs also. Government can easily do it as government doesn’t need to give out money to the civil servants when updating the rule.

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