Government intervenes amid increased incidences of tax evasion and price dumping accusations
DORJI GYELTSHEN
Thimphu
Shopkeepers across Bhutan are raising concerns over the growing presence of online sellers, particularly those utilizing TikTok, who they allege are operating without paying taxes and selling products at significantly lower prices.
This practice, they claim, is leading to substantial losses in their businesses and creating an uneven playing field in the market.
Tenzin, owner of a local clothing store said, “This new tax is a step in the right direction. For years, we’ve been struggling to compete with these TikTok sellers who don’t pay taxes and undercut our prices. It’s unfair and unsustainable. We hope this will level the playing field and allow us to focus on providing quality products and services to our customers.”
The government has taken note of these complaints and has initiated steps to address the issue. The Ministry of Industry, Commerce and Employment (MoICE) has acknowledged the challenges posed by unregulated online businesses and has emphasized its commitment to fostering a fair and transparent e-commerce environment.
While the government has acknowledged the potential benefits of online platforms like TikTok for businesses and consumers, it has also recognized the need to ensure a level playing field for all businesses. The MoICE has stated that it is working on formulating policies and guidelines to regulate online businesses, including those operating on TikTok.
An official with MoICE said, “We understand the concerns of both traditional businesses and online sellers. This tax is not about stifling online businesses, but about creating a fair and level playing field for all businesses in Bhutan. We will work closely with stakeholders to ensure a smooth and effective implementation of this policy.”
One of the key concerns raised by shopkeepers is the lack of tax compliance by many online sellers. In Bhutan, businesses are required to register, obtain a license, and pay taxes. However, online sellers, especially those operating on platforms like TikTok, often operate outside of this framework avoiding tax obligations.
Dorji, owner of Om Grocery Store said, “While I welcome the government’s efforts, I am concerned about the practical implementation. How will they track these online sellers and ensure they are paying the correct amount of tax? I hope the government provides clear guidelines and support to help us adapt to this changing business landscape.”
Another major concern is the practice of price dumping by some online sellers. By selling products at significantly lower prices than traditional brick-and-mortar stores, these sellers are able to attract customers and undercut established businesses. This not only impacts the revenue of traditional businesses but also raises concerns about the sustainability of their operations.
In response to these concerns, the government is considering several measures. These include plans to strictly enforce existing regulations on business registration and tax compliance, ensuring that all businesses, including online sellers, operate within the legal framework.
The MoICE is working on developing specific policies and guidelines for online businesses, addressing issues such as product safety, consumer protection, and fair competition.
The government also plans to conduct awareness campaigns to educate both businesses and consumers about the importance of fair business practices and the risks associated with purchasing from unregulated online sellers.
While the government’s efforts are welcomed by many shopkeepers, some remain skeptical about the effectiveness of these measures. They argue that stricter enforcement and new regulations alone may not be sufficient to address the challenges posed by online sellers.
They also emphasize the need for continued dialogue and collaboration between the government, businesses, and online platforms to find sustainable solutions.
However, some tiktok sellers shared their grievances and doesn’t welcome the new policies of taxes levied on them. Some expressed that the primary concern is that the new taxes will significantly increase their operating costs.
This, they said, will force them to either raise their prices, potentially making their products less competitive, or absorb the costs, leading to reduced profit margins.
Many TikTok sellers operate as small businesses or part-time ventures. They fear that the tax burden could disproportionately affect them, potentially forcing some to shut down their operation altogether. Some sellers have expressed concerns about the lack of clarity regarding the new tax policies.
They are seeking more information on how the taxes will be calculated, how they will be collected, and what support will be available to help them comply with the new regulations.
There is a concern that the new tax policies could lead to over-regulation of online businesses, stifling innovation and hindering the growth of the digital economy in Bhutan.
Some sellers have expressed disappointment that they were not adequately consulted during the development of the new tax policies. They believe that their input could have helped to create a more balanced and effective system.
Dawa Zangmo, a Part-time TikTok Seller said, “I understand the concerns of traditional businesses, but this tax could really hurt small-scale sellers like me. Many of us are just trying to make ends meet. I hope the government considers a tiered tax system or provides exemptions for small businesses to avoid putting undue burden on us.”
Karma, a full-time TikTok Seller said, “This new tax could significantly impact my income. I will have to increase my prices to cover the additional costs which could make my products less competitive. I am worried about losing customers and struggling to maintain my business.”
An official with the Department of Revenue and Customs said they are committed to providing clear guidelines and support to both businesses and online sellers.
“We will also work to simplify the tax filing process to minimize the burden on taxpayers. We believe this tax will not only generate revenue for the government but also contribute to a more sustainable and equitable business environment in Bhutan,” the official said.
The issue of online sellers operating without paying taxes and selling at very low prices are not unique to Bhutan. Many countries around the world are grappling with similar challenges as e- commerce continues to grow.
