- Sales tax: The sales tax is currently Bhutan’s primary source of indirect taxes and is levied on goods entering the country and on a limited number of domestically supplied services such as entertainment and hotel services. The current sales tax has 9 ad-valorem and two specific tax slabs, with tax rates ranging from 0% to 100%, and is mostly applicable on imported goods. Only six types of goods and services are subject to a sales tax at point of sale while around 37% of total imports are subject to a 0% sales tax.

- Excise tax: The excise tax is levied on select domestically produced and imported items and ranges from 30% to 75% (Table A.2). The government also collects fees for liquor exports and excise permit fees for the import of beer.

- Green Tax: A green tax was introduced in 2012 to better protect the environment and reduce carbon dioxide. It is levied on motor cars and vehicles, with the rate varying between 5% and 30% depending on vehicle type. Starting in 2014, petrol and diesel are also imposed a green tax.

- Custom Duty: Imported goods generally pay custom duties ranging from 10% to 100%. Select items are exempt such as import of goods by diplomatic missions, international organizations and their personnel; import of goods by Bhutanese organizations and agencies; import of industrial plant, machinery, their spare parts and raw materials; electric or hybrid vehicles; re-exported durable and consumable household and personal effects or such goods.

While the household survey collects information on the consumption of many different items, not all taxable goods can be identified. In addition, custom duty on cars varies depending on whether the vehicle is new or used, but that information is not collected in the household survey. Table A.1 in the appendix shows Custom Duty, Sales Tax, and Green Tax Rates in 2017 for select items identified in the household survey.

# **_Social insurance contributions_**

There are broadly pension-related contributions and non-pension related contributions. The former includes the National Pension and Provident Fund for civil servants, and the Provident Fund for private sector employees. Various life insurance schemes exist that fall under non-pension related contributions.

- National Pension and Provident Fund<sup>7</sup> : mandatory savings plan of the civil servants, state-owned corporations, and the armed forces. Civil servants contribute a minimum of 11 percent of the monthly salary, while members of the Armed Forces and the Royal Bhutan Police contribute 15 percent and 12 percent, respectively. The employer contributes an equal amount.

- Provident Fund<sup>8</sup> : covers employees of private sector and non-government entities. The contribution is determined by the employment contract and is no less than 5 percent of the basic salary.

- Rural Life Insurance: voluntary life insurance for people above eight years old residing in rural areas. In 2017 the annual premium was 87 Nu per person.

> 7 Rules and regulations of the NPPF are enacted in the “National Pension and Provident Fund Plan (Amendment of 2010), Rules and Regulations of the Kingdom”.

> 8 Rules and regulations of the provident fund scheme are contained in the Private Fund Scheme of Royal Insurance of Bhutan Limited, of the Kingdom of Bhutan 2011.

5