Explained: Bhutan’s strategy to levy Sustainable Development Fee on tourists

The story up to now: After protecting its borders closed for greater than two years to comprise the unfold of COVID-19, Bhutan reopened its gates to travellers on September 23 as a part of its efforts to revive a struggling economic system.

Earlier this 12 months, the Nationwide Meeting of Bhutan gave its nod to a algorithm, which requires all vacationers coming into Bhutan to pay a tourism tax, often known as the Sustainable Growth Charge, or SDF. Whereas Indian vacationers might be charged Rs 1,200 per day per particular person, the charge for vacationers from different international locations has been elevated from $65 to $200. Travellers from India, Maldives and Bangladesh had been earlier allowed free entry into Bhutan with out an advance visa or a every day tourism charge.

Emergence and improvement of tourism in Bhutan 

Typically known as the final Shangri La, Bhutan is understood for its pure grandeur and wealthy heritage. For a very long time, the nation remained remoted to protect its pure magnificence and tradition. 

It was in 1974 that Bhutan first opened its borders to international travellers to assist its economic system. The Himalayan kingdom adopted a “excessive worth, low quantity” technique, contemplating the potential adverse penalties of tourism on the socio-cultural and pure setting and selling itself as probably the most unique locations. Bhutan permitted vacationers solely in teams and allowed a most of 30 individuals who had been required to pay $130 per day. The price of this Minimal Every day Bundle Charge, or MDPR, included transport inside the nation, meals, guides and at the least a 3-star resort lodging. On the time, 287 vacationers visited Bhutan. 

File photograph of a bunch of international vacationers with a neighborhood information strolling previous a row of outlets promoting handicrafts in Thimphu.
| Photograph Credit score:
Singye Wangchuk

In 2012, the all-inclusive every day bundle was elevated to $250 for the height season of March to Might and September to November, and $200 for December to February and June to August. The charge was elevated to scale back the vacationer influx and minimise its hostile influence on the nation’s tradition and setting, the federal government stated. An extra charge of $65 per particular person per evening as a Sustainable Growth Charge was additionally launched. The SDF didn’t apply to regional guests, or vacationers from international locations granted an exemption by Bhutan, which included India.

The last decade noticed fast development within the tourism business, marked by an increase in regional guests. The general determine crossed the 2-lakh mark in 2016. Three years later, Bhutan welcomed 3.15 lakh vacationers — a 15% soar from the earlier 12 months. These included 72,199 worldwide vacationers and a pair of.43 lakh regional guests — 20% greater than in 2018 — of which 2.3 lakh had been regional guests, primarily from India, as per a report on the general sector efficiency in 2019.

Through the years, the tourism business emerged as a significant sector in Bhutan with important contributions towards socio-economic improvement by way of income era and employment. In accordance with the newest Tourism Institution Census of Bhutan, round 52,000 of Bhutan’s 7.8 lakh inhabitants had been employed within the business in 2019. Tourism and associated actions generated gross income of Rs 23,337.15 million in 2019, the vast majority of which was earned from transport, tour operators, journey brokers and reservation providers, as per the report.

In 2019, the tourism business in Bhutan made important contributions to the socio-economic improvement by way of income and international foreign money era and employment creation.
| Photograph Credit score:
Supply: Tourism Council of Bhutan

Why was a tourism coverage the necessity of the hour?

Tourism, together with hydropower and agriculture, is among the largest contributors to the economic system in Bhutan. The business, nonetheless, has introduced with it social, cultural and environmental challenges. Together with considerations over the adverse influence of tourism on Bhutan’s ecology, the rise within the variety of guests resulted in site visitors congestion at vacationer websites and highways and a rise in accidents. It additionally resulted in high quality points in lodging providers, waste administration issues, mushrooming of non-certified vacationer services, and unethical enterprise practices.

The Tourism Council of Bhutan (TCB) expressed comparable considerations. “With our restricted infrastructure and carrying capability it has change into more and more difficult to keep up our coverage of excessive worth, low quantity and making certain an genuine and high quality expertise for vacationers,” it stated. 

As the federal government grappled with fears of damaging results of the business on the nation’s delicate ecology and wealthy cultural heritage in absence of set pointers, a brand new tourism coverage was framed in 2020 to manage the movement of vacationers and “change and adapt” with the evolving calls for of the business. The federal government introduced that “regional vacationers” must pay a every day charge of Rs 1,200 to journey in Bhutan. The brand new algorithm, which had been to come back into drive in July 2020, couldn’t be carried out due to the pandemic.

In the meantime, the 2 years of shutdown dented the economic system because the tourism business remained closed. Arrivals dropped by 91% from 3.15 lakh guests in 2019 to 29,812 guests in 2020, whereas direct income declined by 92% to $19.84 million in 2020 from $23.4 million within the earlier 12 months.

Graph exhibiting pattern of arrival of vacationers in Bhutan
| Photograph Credit score:
Supply: Tourism Council of Bhutan

What are the brand new guidelines and the way a lot will Indians need to pay?

Earlier this 12 months, the Nationwide Meeting handed the Tourism Levy Invoice of Bhutan 2022, which proposed a rise within the SDF for worldwide vacationers to $200 per evening from the earlier $65. The every day tourism charge for these from India, Maldives and Bangladesh remained unchanged at Rs 1,200, as laid down by the 2020 coverage.

As per the principles, along with the SDF, Indian guests are required to indicate their voter card, passport or another id proof on the immigration examine posts, whereas the delivery certificates of kids should be produced.

As per an official, the brand new rule for vacationers from India will stay in impact for 2 years, following which it is going to be reviewed and may very well be revised. The SDF for these from different nations, in the meantime, has been elevated to $200 per evening from the earlier $65 charge. 

The vacationer charge might be used on initiatives like planting timber, upskilling tourism employees, sustaining mountain climbing trails, decreasing reliance on fossil fuels and electrifying automobiles to offset vacationers’ carbon footprints, an official was quoted as saying by Reuters.

Folks visiting Bhutan will not need to pay the minimal bundle charge (MDPR). They’ll now immediately contact resorts, guides and tour operators. A information, in the meantime, stays necessary for all excursions besides from the entry level till the primary resort. Vacationers can e book and prepare tourism providers by way of a web-based reserving portal recognized by the Tourism Council of Bhutan. Guests have to remain in resorts and lodging licensed by the TCB.

Day vacationers who don’t journey past the primary designated level and kids aged 5 years and under won’t be required to pay SDF. These between six and 12 years of age, in the meantime, should pay Rs 600. Along with the SDF, Bhutan will levy an entrance charge for visits to monuments or sacred websites. The rule was notified in a round in July.

Prime Minister of Bhutan Lyonchhen Dr Lotay Tshering stated the brand new guidelines had been according to Bhutan’s ‘excessive worth, low quantity’ coverage.

Does another nation levy a tourism tax?

Through the years, a number of international locations have launched tourism taxes, that are completely different from visa charges, to advertise sustainable tourism and fight the issue of mass tourism. 

In Europe, many international locations levy a resort tax. Germany has a tradition tax and a mattress tax in some cities. Venice launched an entrance charge starting from 3 to 10 eurosin 2018. Vacationer tax in Switzerland is dependent upon the situation. Bulgaria additionally levies a vacationer charge on in a single day stays. The Netherlands levies two varieties of vacationer tax — land vacationer tax for lodging and water vacationer tax for lodging on cruise ships.

Some states within the U.S. additionally cost resort tax— known as occupancy tax.

Some international locations cost a “departure tax”, which is the charge paid by guests for leaving the nation. In 2019, Japan charged the “sayonara tax”, which was used to boost infrastructure forward of the 2020 Summer season Olympics.