IFC, a member of the World Bank Group, is working with the Ministry of Finance and the Inland Revenue Department (IRD) to assess requirements and identify areas of support on tax reforms that will help reduce administrative burden, broaden the tax base, and improve operations for Nepali companies.
An IFC team visited Nepal this month on a tax-scoping mission as part of the Global Tax Simplification Programme, said the bank. "The project, focusing specifically on the needs of small and medium enterprises, will work to improve public awareness on tax reforms and expand outreach to taxpayers," it said.
"We hail IFC’s partnership to work on reforms that will reduce the cost of complying with tax policies and procedures and improve the efficiency of our tax system," revenue secretary Krishna Hari Baskota said, adding that it will benefit local businesses, generate higher investment, and help make Nepal’s tax administration more competitive globally.
The ministry has an ambitious target of raising revenues from the current 15.1 per cent to 20 per cent of Gross Domestic Product (GDP) in the next few years. The Global Tax Simplification Programme has two parallel work streams — technical solutions to simplify systems of taxation and a knowledge management programme designed to enable governments to approach key issues facing tax simplification.
The programme introduced a new approach to tax reforms by focusing on how businesses are affected by the tax system. By streamlining business taxation, the programme sets out to broaden tax base, reduce informality, and spur growth and investment.
"The government is committed to tax reforms and we are happy to offer advisory support and expertise to further improve the country’s business environment for small and medium enterprises,” said Albena Melin, Programme Coordinator for Nepal Investment Climate Programme, IFC Advisory Services in South Asia.
Nepal, which ranks 124th out of 183 economies on paying taxes in the World Bank Group’s Doing Business 2011 report, has significant scope to improve the ranking on paying taxes. IFC creates opportunity for people to escape poverty and improve their lives by supporting private sector development, mobilising capital for private enterprise, and providing advisory and risk mitigation services to businesses and governments