Govt set to amend tax system to encourage M&A

The government is planning some incentives to facilitate Merger and Acquisitions (M&A).
"The government -- after its bitter experiences from the past -- is planning to bring some changes in tax system to facilitate merger and acquisitions," said finance secretary Ramehwor Khanal, speaking at an interactive session on 'Appreciating Mergers & Acquisitions' organised by National Banking Training Institute (NBTI) and Nepal Economic Forum (NEF) here in the capital today.
Mergers & Acquisitions are slowly becoming the buzzwords in Nepali business-o-sphere but due to various constraints like taxes are the hindrances. "Thus, the government has also been thinking of giving tax rebate as a sweetener," Khanal added.
"Domestic banks should merge and have bigger capital base to increase their competitiveness," he said adding that after January, Nepal is open to international banks for wholesale banking.
"Thus, it's important for local banks to be stronger and prepare for the competition," he said adding that the M&A could reduce the cost of operations, though in Nepal merger has been also difficult due to egos and prestige issues among the chairmen and CEOs.
"The cultural integration, technology adaptation, and the huge cost are some of the serious issues that could spoil the M&A scene," said Suman Rayamajhi co-founder of the Beed Investment.
"Despite various hurdles, M&A is inevitable," he said adding that there has to be lots of homework and pre-and -post merger planning for a successful merger.
However, the rate of success of M&A across the globe is at 15 per cent only.
Sujit Mundul, CEO of the Standard Chartered Bank Nepal, sharing his experience of merger between the Standard Chartered Bank and Grindlays Bank agreed that the rate of successful merger is very low.
Sujeev Shakya, president of NEF, urged the government to bring some soaps like tax rebate and golden hand-shake to facilitate the mergers, as it is the need of the hour.
"It's the right time to discuss the mergers as rights issues are being under-subscribed and liquidity crunch is hurting the banking sector," said Siddhanta Raj Pandey, CEO of Ace Development Bank and board member of NBTI. "However, the government's revised tax system and labour law will decide the fate of possible mergers," he added.

PEs spend more on staff
KATHMANDU: Talking about the cost on employees, finance secretary said that per capita expenditure on the Public Entreprises (PEs) is much more. "The PEs spent Rs 50,000 per head," he said adding that it is much more than any private institutions that are considered better pay masters. "Even the loss-making PEs are spending Rs 25,000 per head," Khanal added. "The productivity of the employees is however less than the money spent on them." —HNS