After the first constitutional case
PM: We have to be mindful of the fact that there are two kinds of taxes, the direct and the indirect. Direct tax is something everybody is obligated to pay what is due and assessed, in the form of income tax, once included into the tax net. Indirect taxes are essentially, in principle, of the kind where every citizen has a choice to engage in an act, purchase or acquisition, whereby they will have to pay tax. High Court in fact took the taxes in totality and did not discriminate between the two tax types and said all taxes must be considered.
SC: The Constitution does not differentiate direct and indirect taxes. Tax is tax. It is clear. The simplest meaning under the Constitution’s Article 1 “taxes, fees and other forms of levies…” leaves no room for further interpretations. The argument of the existence of two separate laws related to direct and indirect tax is an assumption and thus untenable.
PM: The Constitution says the state has the responsibility to develop and execute policies to minimise inequalities of income, concentration of wealth, and promote equitable distribution of public services.
SC: While the court applauds the government for its policies to tax, we deplore the non-compliance of the legislative process.
PM: The decision was reached after referring to provisions of Sales tax, Customs and Excise Act, which states the government shall revise or fix the rate of sales tax. It was under the empowerment given to the government by law that we took this decision.
SC: The provision providing that “rates of excise duty on excisable goods shall be fixed and revised by the royal government” are deemed inconsistent with the provisions of the Public Finance Act and the Constitution, unless the phrase “royal government” is replaced with “Parliament”. The inconsistent provisions of the Sales tax, Customs and Excise Act must be deemed to have been outweighed by section 2 of the Public Finance Act. The inconsistent sections must be suitably amended. The rights, privileges and power exercised before the adoption of the Constitution cannot be perpetuated by a provision that is inconsistent with the provisions of the Constitution.
PM: The government needs to be able to make quick decisions on the subject of indirect taxes without having to go through this long, cumbersome process, which, if known to the public, they would begin preempting the decision of the government, which will lead to hoarding, for instance.
SC: The relevant provisions under article 14 of the Constitution, clearly mandates that no tax shall be levied or collected, except under the authority of law. The government’s argument of being empowered to impose indirect taxes, and the need to raise such taxes every now and then lacks legal basis.
PM: The media managed to garner the information through leaks within the government, because of which people began to buy cars and a large number was imported.
SC: The finance minister, on behalf of the government, must be responsible to ensure the confidentiality and security of such tax measures before its submission to Parliament. The bill, relating to imposition or increase of tax, must be deemed effective the same day it is introduced. The government’s argument is therefore, deemed unfounded and unacceptable. The revised sales tax and customs duty for the import of vehicles failed to comply with the legislative procedure.
PM: Once taxes, fees and levies are sent through the legislative process as a bill, it must be discussed at the assembly and the National Council to be approved by simple majority. A joint session ensues, where a support of twothirds majority of the joint session, has to be garnered which is a huge number.
SC: Elected representatives of the people, and not a group represented by the executive, must decide the imposition and revision of taxes. According to constitutional provisions, Parliament must approve it. The exercise of power to alter the rate of taxes by the government alone under the implied authority, the Sales tax, Customs and Excise Act proffered, to impose indirect taxes amounted to usurpation of power the Constitution does not grant. Tax authority has been vested in Parliament to ensure adequate checks and balances, avoid arbitrariness, limit discretion and to ensure compliance with due process in a democratic system of governance. As representatives of the people, Parliament is the appropriate place to ensure the budget best matches the nation’s needs, commensurate with available resources. Therefore, the issue relating to raising taxes must be incorporated in the annual budget report, which must be then debated in Parliament and endorsed as law.
PM: If the assembly and the council take confrontational positions, which could happen in future, such processes will affect the legislation.
SC: With regard to bills concerning “spending or taxation” that forms part of the money bills, are required to be presented to the national council in keeping with the bill passing process. But comments and proposals the national council makes is not binding on the national assembly, although it is important, as it serves as a source of information and understanding of the public regarding the budget that government proposes. The national assembly reserves the privilege to submit the budget bill for royal assent, without incorporating changes the national council suggests, if deemed irrelevant. The apprehension that the national council will block the passage of budget or tax proposals is unfounded.
PM: We are putting legal and procedural hurdles on the way when we say it has to be put as a bill.
SC: The passing of bills in each house requires only a simple majority of the total members in both the houses, or not less than two-third majority in case of a joint sitting. Given the ruling government’s sheer majority in the assembly, it should be able to confirm every proposed taxes.
PM: The HC verdict stands in the way of the government from taking ready donations, grants and aid because of the need for parliamentary approval.
SC: It is illogical and unfounded. The government may raise loans, make grants or guarantee loans in accordance with provisions under the Public Finance Act, which is consistent with Constitution’s Article 14. It provides discretion on the government to raise loans and make grants, so long as they are in the interest of the public, and in agreement with law.
Compiled by Samten WangChuk in Kuensel February 26