All taxation is ultimately overseen by the Bhutan Ministry of Finance, Department of Revenue and Customs, which is part of the executive Lhengye Zhungtshog (cabinet).[1][2][3][4]: Art.
22, § 18 Under the Constitution, taxation is specifically disqualified as the subject of national referendums, leaving tax laws within the exclusive purview of Parliament.[4]: Art.
34, § 3 Bhutanese law generally provides for individual and corporate taxation based on income,[2] sales,[3] imports,[3] and movable and immovable property.
The Act sets forth the duty to pay sales tax and excises on goods and services within Bhutan as well as customs on imports according to rates and schedules published by the Ministry of Finance.
[3] The Act also provides Department of Revenue and Customs agents broad authority to inspect, confiscate, demand accounting, and to detain, fine, and prosecute those who contravene the tax laws.
[7] As part of Bhutan's program of decentralization, local governments and municipalities – including dzongkhags, gewogs, and thromdes, have been authorized to collect property, services, and transactional taxes since at least 1991.
2, § 13 Registered civil society organizations ("CSOs") are exempt from tax on income or other gains earned as a result of investing endowed property or other funds in accordance with regulations promulgated by the Department of Revenue and Customs.
[3]: II § 4 Foreign diplomatic missions, international organisations, and government agencies are generally exempted from paying customs duties and sales tax.
[17] The National Assembly opposition party contested the action in the High Court of Bhutan, Constitutional Bench, winning the initial suit.
[18] On appeal to the Supreme Court of Bhutan, the Attorney General argued that the tax revision was supported by pre-constitutional laws on direct and indirect taxation that remained unrepealed.
The Attorney General also argued against judicial reviewability of political actions, a position based largely in United States jurisprudence developed by Louis Brandeis and supported by American case law.
[19] In December 2010, while the lawsuit was pending, the government ordered a halt of all imports subject to the tax, a move the opposition criticized as contempt of court.
[7] In 1961, the National Assembly established the Gyaltse Kha Lowa (Accounts and Audit Committee) to oversee government revenue and properties.