The government of Bhutan has implemented a tax structure that may have been intended to inspire individuals to donate money to charitable organizations.  However, there is a significant flaw in the maximum permitted donation amount that can be deducted from their overall tax obligations at the end of the year. Tax Payers are currently only permitted to deduct 5 % of their overall gross adjusted income from their taxes as charitable contributions. To encourage greater donations, this cap must be raised, but only after carefully weighing the benefits and costs.

First off, by raising the maximum donation amount permitted, we can motivate more people to make charitable contributions. By doing so, social issues and disadvantaged groups in society would be supported. Second, it would promote charitable behavior and aid Bhutan’s philanthropic industry in expanding.

However, raising the maximum donation amount may have unintended consequences. One is the possibility of tax evasion, since some people would try to manipulate the system for their own financial gain. Another is the potential for lower tax collections as more people might decide to give and hence claim larger tax deductions.

The government must take action to prevent system abuse in order to manage these downsides. Increased oversight and audits of charitable donations can accomplish this. Additionally, the government may offer tax benefits for contributions made to a particular category of charity, such as those that support programs that address poverty, health, or education.

In order to increase donations, the flaw in Bhutan’s maximum donation amount must be addressed. Although there may be negative effects, they can be controlled by the government through legislation and incentives. It is an issue that needs to be addressed because of the benefits of boosting donations to support causes while fostering philanthropic activities.