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Sunday, January 17, 1999 Published at 12:05 GMT

World: South Asia

Tax man stalks Bhutan

Bhutanese have heralded the New Year with panic share-selling

By Subir Bhaumik in Calcutta

For the first time, personal income tax has been introduced in the Himalayan kingdom of Bhutan.

The country's finance minister, Yeshey Zimba, says boosting internal revenue and ensuring more equitable distribution of wealth motivated his government to introduce the income tax regime in the kingdom.

But correspondents in Bhutan say that the introduction of the income tax regime has created panic amongst many Bhutanese, who they say are withdrawing bank deposits and selling off shares to avoid falling into the tax dragnet.

'Lowest tax in south Asia'

As of the New Year, all Bhutanese earning more than 50,000 nguldrums, or $1,200 a year, will have to pay income tax.

Finance minister, Yeshey Zimba, says a varaible tax rate has been introduced in the kingdom. Those earning above 500,000 nguldrums, or around $12,000, will end up paying the maximum 30% tax on their incomes.

Mr Zimba claimed that the income tax rates introduced in Bhutan are the lowest in the South Asia region and one of the lowest anywhere in the world.

Until now, government employees in Bhutan were paying a standard salary tax and companies were paying corporate income tax.

Now, employees will be liable to a tax on all personal income.

According to the finance minister, employees in the low-paying jobs will actually end up paying much less tax.

Equal distribution of wealth

Individual businessmen will now be taxed in addition to companies, while anyone earning an income from house rent, dividends and equities, plantations and orchards, will have to pay income tax.

Mr Zimba said that Bhutan wants to generate more revenue from internal sources to make its economy more sustainable and income tax, he said, was one of the best options for that.

He also said that the income tax system will mean more equitable distribution of wealth in Bhutan as its rich citizens will now end up paying more for the country's ambitious social service schemes.

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