FM Paudel stresses coordination to check revenue leakage

Kathmandu, Feb. 5

The Central Revenue Leakage Control Committee (CRLCC) has stressed the need for an enhanced coordination and collaboration among the stakeholders from the federal to local level to further control the revenue leakage.

Speaking at the meeting of the committee, Deputy Prime Minister and Finance Minister, Bishnu Prasad Paudel, who also serves as the CRLC's coordinator, said that there is a need to tightening control over potential smuggling routes, both around customs checkpoints and alternative ones.

According to a statement issued by the Ministry of Finance (MoF), he said that a responsible and proactive approach from all agencies could lead to significant success in curbing illegal trade. According to rough estimates from economists and concerned agencies, more than 40 per cent of import and exports happens through informal routes impacting revenue collection.

Finance Secretary, Dr. Ram Prasad Ghimire, emphasised for a uniform understanding among various agencies regarding imported and exported goods, their classification and usage. He stressed that all efforts should be based on factual data.

Likewise, Revenue Secretary, Dinesh Kumar Ghimire, said that regulating the source of production and imports would make it easier to control the illegal trade. He also expressed confidence that the commitments made by officials in the meeting would be effectively implemented.

Officials participating in the meeting acknowledged gradual improvements in tackling illegal exports and imports but emphasised the need for additional efforts to achieve meaningful results.

Enhanced border surveillance, stronger market monitoring and prioritising the use of technology for better enforcement are the major recommendations made at the meeting to curb the illegal trade.

The meeting was attended by officials from the Ministry of Finance, Office of the Prime Minister and Council of Ministers, Department of Revenue Investigation, Department of Customs, Inland Revenue Department, Department of Money Laundering Investigation, Nepal Police, Armed Police Force, and National Investigation Department, among others.

Earlier in August 2024, a meeting of the CRLCC had decided to meet the target of revenue collection for the current fiscal year by expanding tax-friendly services and controlling revenue leakage.

It has also decided to form a central rapid patrol team to check the leakage and deploy the team across the southern border. However, the meeting had expressed concerns about not causing any sorrow to the taxpayers conducting business according to the law.

DPM Paudel, then, had also instructed the concerned agencies to make surveillance more effective through the adoption of modern technology, make the classification and evaluation of imported goods realistic, encourage the act of taking and giving bills while purchasing goods or services and be ruthless in investigating the business setups promoting fake bills or firms.

Despite these efforts, revenue collection is yet to be satisfactory. According to the statistics published by the Financial Comptroller General Office, the government could mobilise only 41.48 per cent tax revenue by Tuesday, in almost seven months of the current Fiscal Year 2024/25.

Rs. 532.86 billion of the annual revenue target Rs. 1284.2 billion has been collected so far.

Meanwhile, the non-tax revenue has been impressive with 55.71 per cent achievement which is Rs. 75.25 billion of the annual target of Rs. 135.09 billion. 

 Published in The Rising Nepal daily on 6 February 2025.  

Revenue collection reaches Rs. 323. 24 billion in four months: Ministry

Kathmandu, Nov. 21

Revenue collection for the first four months of the current Fiscal Year 2024/25 has increased by about 17 per cent compared to the corresponding period last year.

According to data presented at a meeting of the Ministry of Finance (MoF)’s High-Level Management Committee, revenue collection stood at Rs. 276 billion during the same period in the last FY 2023/24.

 This year, it has reached Rs. 323.24 billion, the MoF said in a statement on Thursday.

The MoF said that in the last five years, the revenue collection against the target was highest in FY 2020/21 with 92.5 per cent achievement against the annual estimates of Rs. 1.011 trillion.

Likewise, it was 90.24 per cent of Rs. 1.18 trillion in FY 2021/22, 74.54 per cent of Rs. 1.422 trillion in 2023/24, and 71.38 per cent of Rs. 1.112 trillion in 2019/20.

In FY 2022/23, the revenue mobilisation remained the poorest in five years with just 68.23 per cent achievement of Rs. 1.403 trillion.

This year, the annual revenue target is Rs. 1.419 trillion, a 34 per cent increase compared to the actual revenue collected last year. “Of this, the target for the first four months was Rs. 406.37 billion. However, Rs. 323.24 billion has been collected, meeting approximately 80 per cent of the target and marking a 16.85 per cent increase compared to the same period last year,” the MoF said.

Speaking at the meeting, Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel highlighted the importance of managing resources and expenditures effectively. He stressed the need to broaden the tax base, recover arrears, enhance the efficiency of tax administration, ensure ethical conduct among staff and coordinate across ministries.

He also noted the challenges posed by activities outside customs checkpoints and within tax administration.

DPM Paudel instructed to take strict legal action against those attempting to disrupt the tax collection system. Revenue Secretary Dinesh Kumar Ghimire emphasised the need for additional effort to meet the revenue targets.

The MoF stated that while revenue collection has increased compared to previous years, achieving the annual target requires strong coordination and cooperation among all stakeholders in tax administration, which remains a top priority of the ministry.

Director General of the Department of Customs, Harisharan Pudasaini and Director General of the Inland Revenue Department, Ram Prasad Acharya, also assured that they were working diligently to address challenges and seize opportunities to meet revenue collection targets.

Published in The Rising Nepal daily on 22 November 2024.  

FM Paudel directs revenue officials to intensify efforts to meet targes

Kathmandu, Nov. 5

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has directed the officials of revenue administration to intensify efforts in revenue collection.

Addressing a meeting with ministry secretaries and departmental chiefs at the Ministry of Finance at the Singha Durbar on Tuesday, Minister Paudel instructed them to go beyond average performance and ensure their teams are fully engaged in achieving revenue targets.

Stressing that standard efforts would yield only ordinary results, Minister Paudel emphasised that a 13 per cent increase in revenue mobilisation compared to the same period last year was not sufficient, Ministry of Finance (MoF) informed in a statement.

The government has set a target to collect Rs. 1419.30 billion revenue in the current Fiscal Year 2024/25 and has collected 19 per cent (Rs. 280.16 billion) of it in the first three and a half months, according to the data published by the Financial Comptroller General Office (FCGO). Last year, the government was able to rack up Rs. 247.41 billion (17.39 per cent) in the same period against the target of Rs. 1422.54 billion.

As mentioned in the budget of this FY, tax and non-tax revenue targets are set at Rs. 1284.20 billion and Rs. 135.09 billion respectively while grants target was set up at 52.32 billion.

By Monday, total revenue mobilisation by the government stood at Rs. 285.88 billion against the total expenditure from treasury at Rs. 382.51 billion, creating a gap of about Rs. 97 billion between the income and expenses of the government which means the government needs to raise funds from borrowing.

Meanwhile, the capital expenditure has remained just 9.24 per cent (Rs. 32.56 billion) against the total allocation of Rs. 352.35 billion. However, this is better than the performance of the last FY 2023/24 – Rs. 267.96 billion of the annual allocation Rs. 302.07 billion.

Amidst such a situation, DPM Paudel said that revenue collection should be carried out in accordance with the constitution as well as laws and in the nation's best interest, addressing taxpayers’ concerns in line with legal provisions, and urged officials to be proactive.

Minister Paudel further directed officials to take immediate measures to address emerging challenges in revenue collection and enhance coordination among security personnel and other inter-agency teams to curb revenue leakage. He said that any lapses in revenue collection should be met with prompt action against those responsible, the MoF said.

In support of these efforts, DPM Paudel assured leadership's commitment to implementing policy, structural, and procedural reforms to improve the revenue collection system.

The meeting was attended, among others, by Finance Secretary Dr. Ram Prasad Ghimire, Revenue Secretary Dinesh Kumar Ghimire, Chief of the Revenue Management Division Uttar Kumar Khatri, Directors General of the Department of Customs Hari Sharan Pudasaini, and DG of Inland Revenue Department Ram Prasad Acharya.

 Published in The Rising Nepal daily on 6 November 2024. 

DPM Paudel for modernising tax administration

 Kathmandu, Sept. 13

Deputy Prime Minister and Minister for Finance Bishnu Prasad Paudel said that internal resource mobilisation will be made more effective to achieve the goal of development and prosperity of Nepal.

Speaking to the tax officers at a programme held after the inspection of the Internal Revenue Department (IRD) in the Capital on Friday, DPM Paudel said that the tax system will be further modernised in order to mobilize internal resources more effectively, reduce the tax participation cost of taxpayers, and prioritise the development of technology-friendly human resource.

He instructed the employees to work to expand the scope of taxes, create a taxpayer-friendly environment, increase the quality of taxpayer services, increase voluntary tax participation, and stop tax evasion and leakage.

Finance Minister Paudel said that he will also take more initiatives in institutional reforms to create result-based professional organisation with work specialization while emphasise would be given to simplifying the work process, risk-based tax audit and electronic governance.

Saying that the arrears and delinquencies in the big tax offices have increased, DPM Paudel has directed them to conduct a special campaign to clear the arrears.

Finance Secretary, Dr. Ram Prasad Ghimire, instructed the employees to understand their responsibilities and obligations.

Likewise, Revenue Secretary, Dinesh Kumar Ghimire, asked them to move forward by paying attention to the target of revenue mobilisation. The country has not been able to meet the annual revenue targets for the past several years with just about 64 per cent revenue target meeting in the last Fiscal Year 2023/24.

Director General of the IRD, Ram Prasad Acharya, expressed his commitment to fulfill the target of internal revenue collection this year which stands at Rs. 701 billion. Total revenue target for this fiscal is Rs. 1419.30 billion. 

Published in The Rising Nepal daily on 14 September 2024.

Tax collection below 80% in all bands

Kathmandu, Aug. 1

The government couldn't meet any of the revenue targets, except in education service fee, it set for the last Fiscal Year 2023/24.

Through the budget of last year, then Finance Minister Dr. Prakash Sharan Mahat had set the revenue target at Rs. 1422.54 billion but only Rs. 1082.74 billion (74.4 per cent of the annual estimate) could be collected.

According to the statistics of the Ministry of Finance (MoF), none of the tax components crossed 80 per cent of the annual target. However, the non-tax revenue was collected 97.6 per cent of the annual estimate. The government collected Rs. 114.24 billion non-tax revenue last year against the target of Rs. 117.06 billion.

The Value Added Tax (VAT) contributed highly to the state coffers with Rs. 310.45 billion mobilisation which is 72.9 per cent of the target. Among the taxes, collection of income tax remained the highest with 78.3 per cent collection of the Rs. 362.11 billion target.

With the decreased international trade, the customs duty registered the poorest performance with just 65.4 per cent of the target. The government had set the target of Rs. 307.43 billion customs duty for the last FY but only 201 billion could be collected.

 

Annual revenue target and actual collection

Revenue Type	Annual Target (Rs.)	Achievement (Rs.)	Per cent
Total revenue	1422.54 bn	1082.74 bn	76.1
Customs duty	307.43 bn	201.02 bn	65.4
VAT	425.89 bn	310.45 bn	72.9
Excise duty	207.22 bn	146.35 bn	70.6
Income Tax	362.11 bn	283.46 bn	78.3
Non-tax revenue	117.06 bn	114.24 bn	97.6

Source: Ministry of Finance (MoF)

Meanwhile, the government collected Rs. 450 million green tax which was not in the annual estimation.

Likewise, one of the best performing sectors was the 'road construction and maintenance fee' as there was collection of Rs. 4.31 billion against the target of Rs. 4.57 billion.

Meanwhile, the number of taxpayers, both individual and institutional, has gone up significantly in the past couple of years reaching 6.8 million by the end of the last Fiscal Year 2023/24.

More than 93 per cent of the total taxpayers' certificates issued are Permanent Account Numbers (PANs), according to the reports report published by the IRD, the tax administration body under the MoF.

By the end of the last FY 2023/24 (July 15), the IRD issued above 6.34 million PAN cards, of which 617,781 were issued last year.

Personal PAN dominates the all taxpayers' number with 4.26 million obtaining the tax registration. There were 3.65 million Personal PAN holders by the end of the previous FY 2022/23. Two years ago, PPAN holders' number was only 3.05 million.

Likewise, the number of Business PAN certificates has reached 1.99 million by mid-July this year against 1.87 million in the same period last year. About 80,430 Withholding PAN have been issued so far.

Similarly, taxpayers registered with the Value Added Tax (VAT) and excise duty has reached 334,983 and 125,081 respectively.

On the year-on-year basis, there was an increase of 786,343 in PAN holders last year.

Published in The Rising Nepal daily on 2 August 2024.        

Work to meet revenue target, Minister Paudel tells employees

Kathmandu, July 29

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has instructed the employees of the Ministry of Finance (MoF) to work so as to meet the annual revenue target for the current Fiscal Year 2024/25.

Speaking at a programme held at the MoF on Monday to review status and achievement of the annual revenue of the last FY 2023/24, DPM Paudel stated that there was no alternative to meet the target of revenue collection approved by the parliament. He directed all the high officials and staff to work with all their strength to achieve the target.

“We are in transition in terms of revenue mobilisation. We cannot achieve our goals if we move forward according to the current trend and practice," he said. "Let's assess the weaknesses and control the leakage. Let's not allow weakness in revenue mobilisation."

The government has set the revenue target of Rs. 1419 billion for the current FY 2024/25. The size of budget for this year is Rs. 1860.3 billion.  

Asking to maintain cordial relations with the industrialists and taxpayers, DPM Paudel said that that it was necessary to explain to all taxpayers that they should be afraid of their weaknesses but not afraid of the tax administration. He also instructed the employees to move forward by creating an environment that motivated them to pay taxes.

Vice-Chairman of the National Planning Commission (NPC) Prof. Dr. Shiva Raj Adhikari suggested to proceed with a clear strategy of revenue collection.

Likewise, Governor of the Nepal Rastra Bank, Maha Prasad Adhikari, pointed out the need for policy changes to make revenue mobilisation effective to address and accommodate the changes in the tax administration, and resources.

Finance Secretary, Madhu Kumar Marasini, stated that more attention should be paid to the changing structure of the economy as it is gradually moving towards the services sector. Likewise, Revenue Secretary Dr. Ram Prasad Ghimire said that the taxpayers should be treated in a friendly manner and proceed with the necessary facilitation.

In FY 2023/24, only Rs. 1082 billion was collected in revenue against the target of Rs. 1422.5 billion.

High dependence of revenue on import and reduction in import, contraction in industrial production, construction and trade has directly affected revenue mobilisation, the meeting concluded.

Meanwhile, in the first two weeks of the current fiscal year, the government has collected Rs. 18.88 billion revenue. The government expenditure from the treasury during the same period is Rs. 19.34 billion. 

Published in The Rising Nepal daily on 30 July 2024.        

CG-run companies pay Rs. 16.4 bn tax last year

 Kathmandu, Jan. 14

Companies running under the Chaudhary Group (CG) have collectively paid Rs. 16.14 billion in tax to the government in the last Fiscal Year 2022/23 which is 1.87 per cent of the total revenue collected by the government.

Issuing a statement on Sunday, the group claimed that this is the highest revenue any business group paid to the government in a year.

It also said that the contribution to the national revenue decreased in the last fiscal compared to the FY 2021/22 due to economic slowdown. Two years ago, the CG had paid Rs. 17.72 billion in taxes.

"The fact that the Chaudhary Group is able to pay high taxes even when the overall economy of the country is going through a recession and the total revenue of the government has shrunk has encouraged us. We are happy to make a significant contribution to the expansion of the national economy and the development of the nation," said Binod Chaudhary, Chairman of CG.

He also said that the Group is expanding its investment in Nepal at a rapid pace. "We believe that it will make a meaningful contribution to the national economy," he said.

Chaudhary who is also a lawmaker stressed that only by encouraging investors and improving the investment environment in Nepal, it is possible to widen the scope of revenue, so everyone's attention should be paid to this.

The group also said that it had paid Rs. 70 billion in taxes to the government in the last five fiscal years.

Likewise, Nirvana Chaudhary, Managing Director of the Group, said that the CG is expanding its investment by keeping Nepal as its main priority. "We are rapidly expanding investments in food and beverages, hospitality, financial sector, automobiles, education, infrastructure and new technology. We want to make an effective contribution to the overall economy of Nepal."

Although there is no practice of calculating and encouraging the contribution of business groups to the government's revenue in Nepal, Chaudhary Group has been making public the contribution of its group to the revenue every year, read the statement. 

 Published in The Rising Nepal daily on 15 January 2024.   

CNI honours high taxpayers

 Kathmandu, Dec. 3

The Confederation of Nepalese Industries (CNI) has honoured the high tax paying businesses and individuals in the Fiscal Year 2021/22 that were honoured by the Inland Revenue Department last week on the occasion of National Tax Day 2080.

Rajesh Kumar Agrawal, President of CNI, honoured the high tax payers at a programme organised at the CNI Secretariat on Sunday.

The government had honored 16 institutions and individuals as high tax payers.

Among the awardees, two are government-run companies and 14 are from the private and public sectors. The CNI honoured 14 high tax payers in the private and public sectors. 11 out of the 14 are members of CNI, it said in a statement on Sunday.

Dabur Nepal Pvt. Ltd. is the highest tax payer from export business in the FY 2021/22, Asian Paints Pvt. Ltd. is the highest tax payer from special industries, and OCB Foods and Feeds Pvt Ltd from agriculture and livestock industry sector.

Similarly, Chhimek Laghubitta Financial Institution Ltd., Global IME Bank Limited, Life Insurance Corporation (Nepal) Ltd., Nobel Medical College Teaching Hospital Pvt. Ltd., and Mankamana Darshan Pvt. Ltd. were honoured as the highest tax payers from their respective sectors.

Likewise, Bhatbhateni Supermarket and Departmental Stores Pvt. Ltd., Bhotekoshi Power Company Pvt. Ltd. and IME Limited were other business that received the honour as the highest tax payers. From individual category, Bijay Kumar Shah topped the rank while Surya Nepal Pvt Ltd was the one that paid the highest total internal revenue and filed the highest value added tax.

Agrawal said that being a high tax payer is not only a personal and institutional achievement but also an important contribution to the country.

He said that the confederation is proud that about 70 per cent of the highest tax payers from the private sector are CNI members. He also expressed his best wishes for this success in the coming year as well.

Published in The Rising Nepal daily on  4 December 2023. 

Surya Nepal, Bijaya Shah become highest tax payers

Kathmandu, Nov. 23

Surya Nepal is honoured by the government for paying the highest amount of tax in the last Fiscal Year 2022/23.

Finance Minister Dr. Prakash Sharan Mahat honoured the company at programme organised by the Inland Revenue Department (IRD) on the occasion of the National Tax Day 2080 on Thursday morning in Kathmandu.

Surya Nepal has topped the list of high tax payers in two different categories. It has also been recognised as the one that filed the taxes on time.

Bijaya Bahadur Shah has become the highest tax paying person in the country.

Nepal Telecommunication Company (NTC) Limited has become the company to pay the highest income tax while Dabur Nepal Pvt. Ltd. has been awarded for exporting goods of largest amount among the Nepali exporters.

Likewise, from special industries category, Asian Paints has filed the largest amount of taxes, and from the banking sector, Global IME Bank topped the list.

The IRD awarded the highest tax payers OCB Feeds Pvt. Ltd. from agriculture and livestock, Chhimek Laghubitta from microfinance, Life Insurance Corporation Nepal from insurance, Nobel Medical College Teaching Hospital from health and education, Manakamana Darshan Pvt. Ltd. from tourism, Bhatbhateni Supermarket from goods trading, Nepal Stock Exchange from mid-scale tax payers, Bhotekoshi Power Company from energy, and IME Limited from remittance.

Addressing the programme, FM Dr. Mahat said that the flexible monetary policy adopted by the Nepal Rastra Bank (NRB) has caused some discomfort in the economy by increasing flow of loans in unproductive sectors.

According to him, the expansionary monetary policy increased the transactions in real estate and stock market as the bank loan was available in lower rate, and it is now having repercussions on the economy. 

He claimed that the short-sighted policies of the government and the NRB have increased investment in unproductive sectors such as land, houses, vehicles, view towers, stock market and crypto currencies.

"There is laxity in the economy of the world, and we also experienced that laxity which was created due to the internal and external reasons," he said while maintaining that the economy is now moving in a positive direction and the government is encouraging investments and promoting job creation, production growth and use of green energy.

Instructing the employees of the tax administration not to cause trouble to the taxpayers under any pretext, he asked the IRD to make arrangements to honour the best taxpayers in the small and medium enterprise sectors.

Acting Director General of the Department, Arjun Prasad Bhattarai, said that the scope of revenue has been expanded, and by the end of the last Fiscal Year 2022/23, 1.876 million business permanent account numbers and 3.649 million personal permanent account numbers have been issued. The total number of registered tax payers has crossed 5.554 million.

President of the Federation of Nepalese Chambers of Commerce and Industry, Chandra Prasad Dhakal said that the central bank and the government should join hands to improve the current situation in the economy. He said that increasing bad loans in banks and financial institutions have added to the worries of banks.

Dhakal also urged the NRB to announce special financial instrument for the small and medium enterprises without disturbing the current system. 

  Published in The Rising Nepal on 24 November 2023.

Import decline doesn’t bode well for economy

Kathmandu, Aug. 26

Nepal's import of goods in the first month of the fiscal year (mid-July to mid-August) has continued to go down for the second consecutive year.

The total imports decreased by 12.9 per cent in the first month of the last Fiscal Year 2022/23 and it further shrank by 1.56 per cent in the current year 2023/24, according to the statistics of the Department of Customs (DoC).

Nepal imported goods worth Rs. 150.7 billion in 2021/22, which came down to Rs. 131.3 billion in 2022/23, and to Rs. 129.2 billion this year. This is a significant correction in terms of the country foreign trade since its imports had surged by a whopping 75.66 per cent in 2021/22 from Rs. 85.8 billion a year before that.

This drop in imports has reduced the size of total international trade of the country – it has come down to Rs. 142.7 billion in the first month this year from Rs. 171.5 billion in the same period two years earlier.

The first month is significant for the international trade because of the great festivals ahead, targeting which traders and importers bring in clothes and other goods during this month. A leap month this year, however, could have delayed the import of festival goods.

But leaders of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) as well as other business organisations have been warning that the festival season wouldn't be encouraging in terms of market revival.

"Traders and importers have not opened Letter of Credit (LC) to import the goods for Teej, Dashain and Tihar," Senior Vice-President of the FNCCI, Anjan Shrestha, had said in a public programme last week. This fact is echoed by the business delegations meeting the prime minister, finance minister and industry minister.

 

Decreasing imports impact revenue

Decreasing imports will hurt the country's revenue collections at the customs. Customs duty is the second largest source of income for the government.

The amount of revenue collection has remained the same in the first forty days of the year in this and last fiscal. Interestingly, tax revenue of the government for both the years stands at Rs. 81.8 billion, which is about 6.3 per cent of the total annual estimates, according to the Financial Comptroller General Office. In the last fiscal, only about 70 per cent of the annual revenue target was met.

The government and the Nepal Rastra Bank had imposed measures to stop the sliding foreign currency reserves in 2022/23 by discoursing imports. The restrictions covered the imports of luxury goods. In addition, the NRB had implemented a provision that required the importers to maintain 50 per cent or 100 per cent cash margins while opening the LC to import, primarily, luxury goods.

According to the experts and businesspersons, decreasing demands in the domestic market has also discouraged the import of foreign goods.

 

Imports go up

Meanwhile, imports from India and China, two major source countries, have gone up significantly. Imports from India have jumped to Rs. 81.2 billion this year from 78.6 billion last year, while imports of Chinese goods increased to Rs. 21.9 billion from Rs. 18.7 billion. Imports from the United Arab Emirates, Argentina, Indonesia, Belgium, and the United States of America saw a decline.  

Petroleum products (diesel, petrol and liquefied petroleum gas) are the top three imports of Nepal, followed by iron and steel, paddy, smartphone and gold.

Similarly, export share to total trade has gone down to 9.48 per cent this year from 12.11 per cent in 2021/22. In mid-July to mid-August this year, Nepal exported goods worth Rs. 13.5 billion which is less by 8.65 per cent of the last year's 14.8 billion, while in 2021/22, the country's exports amounted to Rs. 20.7 billion in the first month.

But a good news for this year is that Nepal's export to China reached Rs. 361 million in the first month this year from Rs. 62 million in the same period last year. If this trend continues, Nepal will have an opportunity to expand as well as diversify its export trade. 

Published in The Rising Nepal daily on 27 August 2023. 

Treat taxpayers well to improve tax compliance: Dr Mahat

Lalitpur, Aug. 15

High government officials including Finance Minister Dr. Prakash Sharan Mahat have pointed to the need to improve the image of tax administration in the country by being firm in the implementation of tax laws and policies and becoming friendly to taxpayers.

"The tax administration should act in a way it would facilitate the businesses and industries. Show respect to the taxpayers," they said while speaking at a management seminar 2080 organised by the Inland Revenue Department (IRD) in Lalitpur on Tuesday.

Finance Minister Dr. Mahat directed the IRD officials from 84 revenue offices across the country who gathered here to be friendly to taxpayers and provide fair treatment to even those who evade taxes.

Advisor to the Finance Minister, Dr. Posh Raj Pandey, urged the tax administration not to scare people from tax compliance, implement robust information dissemination system to inform people to save themselves from fines.

"Improve your social image. Make impression that you make just and reliable decision," he said.

Stating that he was shocked by reduction of annual revenue target of the last Fiscal Year 2022/23 due to non-collection of taxes, FM Dr. Mahat advised the officials of the IRD to pay serious attention to fulfill their responsibilities. "The ministry would put every effort to address the challenges that come across the tax administration so you need to pay full attention to meeting the annual revenue target for this year 2023/24," said Dr. Mahat.

According to the government and experts, 40 per cent of the country's economy is grey, and bringing it under the tax net would increase revenue collection.

This year's revenue target is Rs. 1422 billion of which Rs. 1305 billion is tax revenue including the customs duty and excise duty.

Dr. Mahat directed the IRD to not to give exemption to those who do not come under the scope of tax by making various excuses stating that if it is allowed to happen, other taxpayers may also elude.

He said that although some individuals and firms are ready to pay more tax, they are reluctant to come under Value Added Tax (VAT). "There are many people who are ready to pay other taxes, but do not want to come under VAT. Why is it a problem to come to VAT?" he asked and suggested the tax officials to find the reasons behind this tendency.

 

Focus on reforms

Dr. Mahat directed them to focus on the reforms in tax administration and generate positive discourse on the economic situation of the country.

Similarly, he expressed his belief that the economy is still not negative and has slowed down a bit, but now there is sufficient liquidity in the banks, and interest rates have gradually declined, so demand will be created and activities will increase.

The Finance Minister advised the private sector not only to talk about negative aspects of the economy, but to discuss positive things. He emphasized that everyone should communicate positive things in order to speed up the economy as the pace is slow. "People are afraid to spend and take loans after the spread of rumours that the economy is on the brink of recession. Therefore, the private sector should be positive about the future prospect of the economy," he said.

According to him, there is a contradiction about protecting domestic industry and facilitating the import trade. So, the private sector should support the government in the drive to support domestic products and industries.

 

Nurture the taxpayers

Finance Secretary, Arjun Prasad Pokharel, directed them to respect and nurture the taxpayers. Meanwhile, he also asked them to discourage non-filing and make an environment including enforcing the policies to motivate taxpayers to clear the past tax dues.

He suggested the IRD to devise a system to implement reform in the tax administration.

"Take note of the provisions made in the budget of the current FY 2022/23, and analyse the reports of the Auditor General and Commission for the Investigation of the Abuse of Authority to find out the missing and leakage-prone areas," he directed the IRD.

He also suggested enhancing the use of information and communication technology and sharing the best practices and experiences.

  

Annual revenue target achievable

Deergha Raj Mainali, Director General of the IRD, expressed his commitment to meet the annual revenue estimates.

He also promised that the complaints and grievances of the private sector businesses would be immediately addressed. Mainali informed that the IRD is studying the matter why revenue generation was dismal while the Gross Domestic Product (GDP) increased.

Likewise, Dr. Ram Prasad Ghimire, Revenue Secretary, asked tax officials to make additional efforts to clear the tax backlog and bring non-filers to the tax net.

Speaking on the occasion, Senior Vice-President of the Federation ofNepalese Chambers of Commerce and Industry (FNCCI), Anjan Shrestha, said that the private sector has a promotion that the coming festival season would not infuse confidence in the market.

According to him, traders have not managed their stocks and opened letters of credit to import goods required for festivals which would have adverse impact on the revenue target.

Shrestha said that the wagon of economy has been stuck in the mud, so the government should unroll ways to pull it out of the mud and lubricate it to make it move forward smoothly.

 Published in The Rising Nepal daily on 16 August 2023.   

Minister Mahat asks revenue officials to work proactively

 Kathmandu, July 5

Finance Minister Dr. Prakash Sharan Mahat has instructed the employees of the Inland Revenue Department (IRD) to be responsible and dutiful in collecting revenue in order to meet the revenue targets for the current Fiscal Year 2022/23 as well as the upcoming year.

The government is facing a hard time to meet its annual target of revenue collection. It could collect only 62.48 per cent, Rs. 913 billion, revenue (tax, non-tax and grants) of the annual estimates of Rs. 1458.6 billion by Tuesday evening.

Of Rs. 1403.1 billion tax and non-tax revenue, only Rs. 868.4 billion could be mobilised so far while the total expenditure by Tuesday stands at Rs. 1275.7 billion.  There is a wide gap of Rs. 364 billion between income and expenses.

FM Dr. Mahat asked the IRD officials to be congenial with the service seekers, not to look for personal benefits and said that no one is exempted from their duties and all should work dutifully in whatever responsibility they have.

"There should be no compromise on the tax that should be received by the state at the cost of personal benefits," he said.

According to him, the biggest task of the Ministry of Finance is to raise resources, and they are responsible for raising resources to address all the needs of the country.

"The biggest part of it is revenue. Now the share of the revenue is not enough to address the present development need. There is a need for increasing the revenue," said FM Dr. Mahat while adding, "We want the revenue to contribute to our salaries, allowances, social security payments and capital expenditure needs. However, we are not able to complete it."

According to the finance minister, it is not enough to increase the scope of revenue, the economy has to be accelerated, and for that, the government has talked about making the capital expenditure sustainable through the budget proposal.

He claimed that the point-by-point clear proposals have been made in his budget speech, and maintained that they have to pay serious attention to collecting customs duties and internal revenues.

Dr. Mahat stated that the country cannot always depend on revenue based on customs duties. "Internal loans and foreign loans should be invested in productive sectors. It has already been started. In the coming days, the internal revenue has a very big responsibility. So, there are concerns about how to expand it. The role of the IRD is important in this regard," he said.

Likewise, he stated two alternatives to increase the scope of revenue through IRD: making economic dynamic and bringing those who are evading taxes into the tax net.

Dr. Mahat said that the government has proposed many new taxes through the budget of the next Fiscal Year 2023/24.

According to him, the Value Added Tax (VAT) should be taken seriously. "It is a serious matter that the amount paid by the service recipient to the state is misused. Businessmen collect VAT during sales, and it should be filed unconditionally to the revenue. Any misuse or non-filing should be taken seriously," he said and instructed to check the misuse of revenue and raise the arrears. 

Published in The Rising Nepal daily on 6 July 2023. 

Flour Mills seek inclusion in agricultural industry

Kathmandu, June 6

Nepal Flour Mills Association (NFMA) has demanded that the government should take initiatives to formulate a long-term policy to increase wheat production, and to provide facilities to the flour mills by including them in the category of agricultural industry.

"Since flour is a 100 per cent agricultural processing industry, the government should take initiatives to keep the mills under the agricultural industry and provide facilities accordingly," the association demanded at its 23^rd Annual General Meeting held the other day in the capital.

Likewise, it asked for simplifying the wheat import procedure from India as the raw materials of flour wheat are not enough from the production of Nepal. However, stating that since the country has become self-sufficient in flour, there is no need to import flour from abroad.

Export subsidy to protect the domestic industry as it has a high potential of third country export and providing subsidy on such exports,   maintaining the bank interest rate at single digit, fair competition in the market, and revision of the customs evaluation of wheat and flour imports, and insurance premium of flour industry are other demands put forth by the association.

Similarly, it recommended setting the customs duty at 1 per cent while importing wheat for the industry as its raw materials.

About Rs. 17 billion is invested in flour mills in Nepal and it has created more than 4,000 jobs, according to the association

Meanwhile, the meeting unanimously elected Kumud Kumar Dugar  as its new President for the second term. It also elected first vice-president Dinesh Kumar Agarwal, second vice-president Arun Goenka, third vice-president, Bikas Begwani, general secretary Radheshyam Agarwal, secretaries Anand Ojha, Dhiraj Golcha and Sanjay Agarwal, and treasurer Binod Kumar Agarwal. The new working committee of 17 people, including members, has been elected unanimously.

 Published in The Rising Nepal daily on 7 June 2023. 

Textile, clothing industries seek incentives amid stiff competition from foreign firms

Kathmandu, May 13

For the past several years, textile manufacturers in Nepal have made numerous rounds of Singha Durbar, the administrative centre of the country, sat with the ministers, policy makers and bureaucrats, organised dozens of interactions, forums and seminars requesting to check the illegal imports of textile and clothing (T&C) but the progress is meager with the country witnessing about 80 per cent unauthorised buy in of T&C every year.

A few months ago, a news about the smuggling of about 1500 containers loaded with cloth and garment into Nepal on the eve of general elections last year went viral. But there is a mysterious inaction from the side of the authorities including the ministries and concerned departments.

President of the Nepal Textile Industries Association (NTIA), Shailendra Lal Pradhan, probably represented the voice of the sector when he questioned Finance Minister Dr. Prakash Sharan Mahat at a pre-budget discussion programme on Wednesday about the government turning deaf ears to the demands of the manufacturing industries which are proritised by the government.

 

Demand and supply gap

There is a consumption of about Rs. 600 billion worth of cloth and colth-related products in Nepal, but legal imports and domestic production make up only Rs. 100 billion. The size of consumption is estimated by the NTIA in 2018 with the assumption of about 30-33 metres per capita cloth demand per year. It said that the estimate was based on an Indian study conducted in 2012 which said that an average Indian needed about 25 metres of cloth a year and there was an increment by 5 per cent each year.

"We have put the statistics at 30 metres per capita per year on the basis of the Indian study since our environment, socio-cultural status and climatic conditions match with our southern neighbour," the association had said then.

 

If one is to believe the customs data and domestic product estimates, an average Nepali citizen spends only Rs. 3,428 for all sorts of cloth including curtains, table cloth, umbrella, bag and shoes. "This is implausible. Take an example of a school going kid, you have to buy at least two pairs of shoes, two sets of dresses, a bag, a sweater or a coat, a jacket and many more. The money doesn't cover the need," said Jitendra Lohia, Vice-president of the NTIA.

On the contrary, according to the NTIA estimates, a person spends about Rs. 20,568 on all types of cloths in a year.

 

Regulating open border

The largest challenge for the textile, and many other industries operating in Nepal, comes from the open border with India. While Nepalis are the customers of all businesses in the bordering towns and cities in India, their purchasing of cloth could reach the size of about Rs. 100 billion, said Lohia who is the Managing Director of Pragati Textile Company, one of the largest manufacturing facilities in the sector.

"It is very difficult to regulate the open border that spans more than 1,800 kilometres. Therefore, the government here should enact provisions to protect domestic industries and discourage import of cloth and garments," he said.

Earlier, the country had imposed 15 per cent customs duty on most of the cloth imports but with the implementation of the SAFTA (South Asian Free Trade Area) the rate has come down to 5 per cent which has directly impacted on the competitiveness of the domestic industry.

According to the NTIA, this provision has forced many textile industries to close down their operations. So, the government should impose 10 per cent excise duty on cloth and garments and wave off the duty for domestic products in order to make them competitive, the association said in a memorandum submitted to the Ministry of Finance three weeks ago.

 

Tax discounts

The NTIA has demanded to continue with the 50 per cent discount on electricity tariff and 5 percentage point discount on interest of bank loan with the removal of Rs. 50 million ceiling for the loan. The government had decided to offer the first two facilities to the textile industries about five years ago. But they couldn't be continued.

NTIA President Pradhan suggested the government to apply multi-rate for the Value Added Tax (VAT) and charge only 5 per cent on textile as practiced in India or provide VAT adjustment facility or provide cash subsidy equal to the VAT. "Likewise, the government should immediately impose VAT on cotton yarn. It will discourage the illegal trade of yarn and cotton cloth, and increase the revenue of the government," Pradhan urged the FM Dr. Mahat on Wednesday.

To minimise the impacts of the open border, smuggling of cloth and shopping of any amount from the bordering Indian towns, the government should implement the provisions suggested by us for at least a decade, he said.

Nepal's neighbouoring countries like India, Pakistan and Bangladesh have provided discounts on interest of bank loan and electricity tariff, up to 45 per cent subsidy on technology transfer, and cash incentives on cloth and garment exports. India has been charging only 5 per cent GST on cloth.

 

Export or export-substitution?

Nepal exports cloth and garments of Rs. 10 billion to Rs. 12 billion in a year. In Fiscal Year 2021/22, Nepal exported such goods of Rs. 12.6 billion and in nine months of current FY 2022/23, textile and garment of about Rs. 10.5 billion was exported.

Likewise, the country has imported textile and clothing of Rs. 35.8 billion in nine months this year. Last year, the import size of such items was Rs. 56.02 billion. The country had earned the revenue of Rs. 18 billion from T&C imports. Government authorities said that a significant size of T&C items is under-invoiced.

Entrepreneurs and industrialists involved in textile, yarn and garment say that the increasing domestic consumption of 'made in Nepal' clothing is the best solution for the industries. Various studies conducted by the national and international agencies have concluded that Nepal's landlockedness and poor infrastructure has made the goods expensive by 15-27 per cent in the international markets. When countries like Bangladesh, India and Pakistan are using cutting-edge technology, sea transport, and enhanced the productivity of their workers, Nepal is lagging behind in such terms.

"The best way to promote domestic textile and clothing industry is to protect them by offering incentives on tax and utility, and imposing excise duty on imports," said Lohia. He said that the policy makers are yet to turn their attention to import substitution from export promotion. It will save the hard-earned foreign currency and reduce the unauthorised trade.

Secretary of the Ministry of Industry, Commerce and Supplies, Madhu Kumar Marasini, also stressed on the regulation of border to promote the domestic industry. "The government is providing concession on the duty of raw materials, and facilitating the export of T&C items. The MoICS will communicate with the MoF to further facilitate the supply of raw materials," he said.

The government is also providing training to the workers of the industry. But this is not sufficient, say the industrialists.

 

Developing value chain

Meanwhile, the incentives provided to the domestic textile industries will result in the reduced price of textile which will ultimately attract the garment industries to the Nepali raw materials. The growth of textile industry will make a positive impact on yarn manufacturers as well.

Nepal is exporting yarn of up to Rs. 10 billion primarily to Turkey, India and other countries. The massive export to Turkey is happening because the country is not importing Indian yarn, so the future is not assured. "Therefore, we need to develop a value chain inside the country. It will not only cushion the industrial sector but also create jobs and increase revenue," said Lohia. According to him, this integrated development could generate additional 500,000 jobs in the next few years.

Currently, there are about 250 textile industries of which 20 are large. About Rs. 20 billion is invested in those industries. They have employed 50,000 people in their factories. 

 Published in Friday Supplement of The Rising Nepal daily on 14 May 2023.

EV sector in dire need of policy stability

Kathmandu, May 4

Although there is an annual growth of 69 per cent in two-wheelers and growth of 43 per cent in private passenger vehicles in Nepal, there is no policy for charging infrastructure and promotion of electric vehicles.

About 1540 passenger vehicles were sold in 2021/22 which grew to 2416 in 2022/23. Likewise, the number of two-wheelers sold increased to 7296 this year from 2721 last year.

“Despite the current economic challenges faced by various businesses, the electric vehicle (EV) sector has exhibited growth. One of the major reasons for this growth is the duty benefit,” Vice President of NADA Automobile Association of Nepal, Rajan Babu Shrestha, said at an interaction on ‘Electric Mobility: Suggestions for policy and budget of FY 2022/23’ organised by Nepal Association of Financial Journalists (NAFIJ) in collaboration with NADA. 

Meanwhile, there is a growing demand for infrastructure like charging stations across the country to promote the use of EV which has the potential of reducing the trade deficit by decreasing the import of fossil fuel. As per the recent statistics of the Department of Customs, the country’s total exports are enough just to cover 45 per cent of fuel import.

By the end of the ninth month of the current Fiscal Year 2022/23, Nepal exported goods worth Rs. 118.27 billion and imported petroleum fuel including diesel, petrol and liquified petroleum gas worth Rs. 261.09 billion.

Therefore, businessmen have emphasised that the government should adopt a stable policy to promote and develop electric vehicles in Nepal. They said that there should be policy stability to encourage electric vehicles.

Shrestha said that the government should take a clear policy on this issue as e-mobility is the future. "The government has set a target of increasing the number of electric vehicles to 25 per cent of the total number of private vehicles plying in Nepal by 2025.”

"However, due to the fluctuations in customs duty on electric vehicles in each year's budget, the consumers couldn’t be assured. Similarly, this up and down in tax rate has also created confusion on the part of businesspeople as well,” he said.

Shrestha emphasized that the next budget should have an electric vehicle-friendly policy. According to him, currently there are DC chargers at 58 locations and AC chargers at 300 locations in Nepal to charge electric vehicles.

Meanwhile, Nepal Electricity Authority (NEA) has put 40 DC chargers into operation. Even though the highway has a station at a distance of 100 km, it is still insufficient. Electric vehicles should be used more to increase the consumption of electricity which is being wasted, said Yamuna Shrestha, central member of NADA. She said that the government policy on EV should be stable for at least 3 years in order to promote the use of it.

According to experts, the battery and range anxiety among consumers is also decreasing in Nepal recently. "Until a few years ago, it was compared to fuel-powered vehicles, but now the trust of EVs is increasing among consumers," said Sagar Gyawali, an engineer of the NEA. According to him, the electric vehicle market will grow if the customs rate were reduced even though there is not a clear policy for the time being.

Similarly, Nepal Oil Corporation’s Deputy Director Manoj Kumar Thakur said there is a need for more coordination with the NEA to have charging stations at petrol pumps.

"There should be a standard for placing charging stations at petrol pumps. NOC is for whatever support is required for placing charging stations," he said.

Similarly, the Director of Internal Revenue Department, Raju Pyakurel, said that although the tax is being collected as prescribed by the government, reducing the tax rate on EVs will also benefit the country's economy and the environment. "Following the global trend, Nepal should also need to adopt a policy to encourage electric vehicles," he said.

Director of the Department of Transport Management, engineer Ram Chandra Poudel, said that the government should invest and subsidise electric public transportation system. According to him, the department would recommend the government for the same as well as to create battery recycling policy.

Poudel also said that the fare of EV could come down in future.

 

Minister Jwala commits to prioritise EV

Minister for Physical Infrastructure and Transport, Prakash Jwala, said that he would give priority to the promotion and development of electric vehicle (EV) in the upcoming budget.

“It is the responsibility of the government to promote the EV in order to have benefits in environmental, economic and trade aspects. I will try to give it a priority in the budget of the Fiscal Year 2023/24,” he said while addressing the programme.

Charging stations are being built at 60 to 70 kilometers of the national highway in joint collaboration between the Nepal Electricity Authority and the private sector.

In this situation, the government is committed to promoting the use of EVs. According to Minister Jwala, the government will make future policies and programmes and budget by keeping electric vehicles and immobility as a priority.

Meanwhile, he also expressed concerns about the decreasing budget in the infrastructure projects and committed to end the current impasse in the construction sector. “There is a situation where neither progress is achieved nor contract with the contractor is scrapped. This indecision should be ended,” he said.

Stating that the construction sector has become ‘sick’ due to various reasons, he vows to address it through policy, improved process and staff deployment. 

Published in The Rising Nepal daily on 5 May 2023.