Subnational bodies fail to build tax administration

Kathmandu, Feb. 25

While there are tax duplications among the various levels of government, the provinces and local bodies could not build a reliable tax administration to arrange resources for development financing, said the Nepal Revenue Advisory Board (NRAB).

"Revenue capacity of the provinces and local bodies has not been developed in the past five years since the country was ushered into the federal structure. They are heavily reliant on the federal government's grants for it," Member Secretary of the NRAB Bhumi Ram Sharma said at an interaction on 'Revenue policy' jointly organised by the board and Nepal Association of Financial Journalists (NAFIJ).

The NRAB is a permanent structure to provide necessary suggestions and recommendations to the government in the field of revenue mobilisation and management.

According to it, weak non-tax revenue administration, failure to check cross border smuggling of goods into Nepal, import-based revenue structure and complexities in the implementation of transaction price at the customs are the major challenges to the revenue mobilisation in the country.

Likewise, less formalisation of informal economic activities, lack of personal tax compliance and delay in tax jurisprudence are other obstacles to it.

Chairman of the board, Mahesh Prasad Dahal said that the government should immediately review the Value Added Tax (VAT) provision and opt for multi-rate for the VAT.

To increase the revenue, the NRAB has suggested the government to allow for wealth declaration for once so that the revenue could be collected from the news sources as well. However, a large amount of revenue due is a matter of worry. "About Rs. 96 billion in revenue is due. Raising this liability is a challenge for the government," said Dahal.

He also said that the tax discount in a large amount was the matter of worry.

Director of the Department of Revenue Investigation (DRI) Mukti Aryal said that there is a challenge to raise the evaded tax.

Chartered Accountant Shesh Mani Dahal said that frequent changes in the tax policies have added challenges for the entrepreneurs. A clause in the income tax law has been amended 20 times in the past 20 years, he said.

Journalist Shreedhar Khanal and Sharma had presented papers at the programme and Director of Inland Revenue Department (IRD) Raju Pyakurel, Shesh Mani and Aryal had commented on the paper.

Published in The Rising Nepal daily on 26 February 2022.