High earners still out of tax net: NPC vice chair

Low capital expenditure might result in liquidity crisis: Central Bank governor

 
Though the government has been able to meet its revenue mobilisation target, the biggest earners are still out of the tax net, according to vice chair of the national think tank.

The ministry must identify the high earning class and bring them under the tax net, said vice chair of National Planning Commission (NPC) Deependra Bahadur Kshetry, during the Revenue Evaluation Meeting at the Finance Ministry here today.

The ministry must recognise those paying taxes, work harder on house rent tax mobilisation, simplify customs for trade facilitation, and check the rising inflation, he added.

The government has been able to mobilise Rs 134.57 billion by the end of six months of the current fiscal year, informed finance secretary Shanta Raj Subedi, on the occasion.

Value Added Tax (VAT) contributes 31 per cent to the total revenue, whereas income tax 23 per cent, customs 19 per cent, excise 13 per cent, non-tax revenue 11 per cent, vehicle registration tax two per cent, and house and land registration tax contributes one per cent to the total revenue, according to the data of the first six months of the current fiscal year.

"The government has mobilised Rs 40.13 billion in VAT, Rs 30.64 billion in income tax, Rs 27.07 billion in customs, Rs 17.69 billion in excise, Rs 14.50 billion in non-tax revenue, Rs 2.15 billion in vehicle registration, and Rs 1.74 billion in house and land registration tax to make it a total of Rs 134.57 billion, he briefed, adding that compared to the same period of the last fiscal year, revenue mobilisation increased by 25.72 per cent, but non-tax revenue decreased by 6.58 per cent.

Despite good revenue mobilisation, other economic indicators are not satisfactory, Subedi added. "Rather than those which could help in capital formation, consumption-led imports have increased," he said, adding that there is a huge challenge in bridging the ballooning trade deficit. "Low capital expenditure will also hit revenue mobilisation."

The revenue mobilisation growth rate has been declining in recent months as compared to the beginning of the fiscal year, when revenue mobilisation saw over 30 per cent increment as compared to the same period of last fiscal year.

"Though customs and income tax mobilisation are encouraging, the rest are not satisfactory," said joint secretary Rajan Khanal. "Low public expenditure will hit revenue mobilisation in the coming months," he said, adding that low exports will further widen the trade deficit. "The weakening rupee will also hurt customs."

Khanal also asked for a study on the rising inflation despite low money supply.

Similarly, central bank governor Dr Yubaraj Khatiwada opined that the low expenditure despite encouraging revenue mobilisation could create a liquidity crisis. The government has been able to spend only Rs 7.04 billion in capital expenditure in the first six months of the current fiscal year, compared to Rs 9.56 billion in the same period last fiscal year. The government's inability in public spending could tighten the liquidity in the banks and financial institutions in the coming days.
"Likewise, loadshedding will pull industrial production down and there must be a coordinated approach to counter the rising informal economy," he suggested, adding that the government must discourage and substitute imports to achieve economic growth.

The ineffective use of resources has pulled the economic growth rate down, concluded senior economic advisor of the Finance Ministry Shree Ram Poudel.

 

Contribution

VAT — 31 per cent

Income tax — 23 per cent

Customs — 19 per cent

Excise duty — 13 per cent

Non-tax — 11 per cent

Vehicle registration — 2 per cent

House and land registration — 1 per cent

(Source: Finance Ministry)

NIC Bank, Bank of Asia Nepal sign merger agreement

NIC Bank and Bank of Asia Nepal have signed a merger agreement.

The merger agreement was signed by the chairmen of both the banks today evening in the presence of directors, joint merger committee members, promoters, and officials of both the banks.

However, the merger is subject to approval of the annual general meeting of both the banks and regulatory authorities.

It will be the first merger between two healthy class 'A' financial institutions that will lay the foundation for a strong commercial bank, the chairmen said, adding that the signing of the agreement was the culmination of a meticulously planned merger process that started some six months ago. "The merger will create one of the largest banks in the country in terms of capital fund, balance sheet size, branch, ATM network, customers and employees," they claimed.

NIC Bank posted an operating profit of Rs 666.79 million, whereas Bank of Asia Nepal posted a profit of Rs 327.11 million in the last fiscal year. Share trading of both the banks has been halted for the last six months due to the merger process.

Both the banks have lauded their stakeholders including shareholders, promoters, regulators and staff for their excellent support and cooperation for the much anticipated merger that will not only increase the balance sheet strength but also the professionalism of the merged institution as by the time the merger is completed, the core capital, including reserves, of the new entity will be around Rs 5 billion.
The central bank has asked the banks and financial institutions with the same promoters to go for merger. NIC Bank and Bank of Asia Nepal are largely promoted by the same groups. Bishal Group and Shanghai Group hold majority stakes in both of them, whereas NIC Bank has Golchha and Golyan Groups also as promoters and Bank of Asia Nepal has promoters from Lucky Group.

TeliaSonera fourth quarter net profit up by 35 per cent, organic sales rise by 1.8 per cent

TeliaSonera reported a strong improvement in net profit and cash flow for the fourth quarter, while underlying sales growth was better than its earlier guidance. Net profit jumped by 34.9 per cent to SEK 6.88 billion, helped by a profit from selling shares in the Megafon IPO, and free cash flow surged to SEK 2.93 billion from SEK 552 million a year earlier, thanks to lower capex and changes in working capital. 

Adjusted EBITDA was still down by 3.2 per cent to SEK 8.97 billion, and revenues fell by 0.7 per cent to SEK 27.07 billion. Excluding currency effects and acquisitions, quarterly sales were up by 1.8 per cent and EBITDA was down by 0.6 per cent. Organic revenue growth was 1.3 per cent in mobile services and 16.3 per cent in Eurasia, while sales fell by 2.7 per cent in broadband services. 

TeliaSonera said all countries in Eurasia returned to positive revenue growth in the fourth quarter, while its mobile division benefited from higher equipment sales and better trends in service revenues in several markets. At the broadband division, growth in the fibre customer base accelerated towards the end of the year and customer satisfaction improved. Over the full year, organic revenue growth reached 1.2 per cent, better than the operator's outlook of flat to one  per cent higher. 

TeliaSonera added 1.7 million new subscriptions in the last three months of the year, plus 2.3 million new subscribers at associated companies, for a total customer base of 183.0 million at end-2012. The company maintained its dividend at SEK 2.85 per share. 

For 2013, the company forecast revenues in local currencies at the same level as last year and a small improvement in the adjusted EBITDA margin, helped by the ongoing restructuring announced last October.
TeliaSonera said it achieved around SEK 200 million in cost savings in fourth quarter, out of a targeted SEK 2 billion by the end of 2014. Capex is estimated at about 14 per cent of revenues in 2013, excluding licence and spectrum fees, after 14.6 per cent in 2012.

Tablet shipments climb by 75 per cent to 52 million units in fourth quarter

Worldwide tablet shipments soared by 75.3 percent to 52.5 million units in the fourth quarter of 2012, compared with 29.9 million units a year earlier, according to International Data Corporation (IDC).
Fourth quarter shipments rose by 74.3 per cent versus 30.1 million units in the third quarter. The market was led by Apple with 22.9 million units shipped, 48.1 per cent more than in the fourth quarter of 2011, giving it a 43.6 per cent market share. Samsung's unit sales surged by 263 per cent to 7.9 million units, for a 15.1 per cent market share, followed by Amazon, up by 26.8 per cent to six million units for an 11.5 per cent share, Asus up by 402.5 per cent to 3.1 million units for a 5.8 per cent share, Barnes & Noble down 27.7 per cent to one million units for a 1.9 per cent share, and others up 77.4 per cent to 11.6 million units. Microsoft entered the market during the quarter with its Surface tablet running Windows RT, but failed to reach the top five after shipping fewer than 900,000 units.

Entrepreneurs decry forceful donation, seek security

The business community has once again urged the government to immediately stop the forceful donation drive and security threat on entrepreneurs.

The private sector, which is facing hard times due to chronic power shortage and repeated labour problems, has become a milking cow for the UCPN-Maoist, said an entrepreneur, asking not to be named.

"On one hand, industries have not been able to operate at full capacity and on the other, we are getting letters from the ruling UCPN-Maoist asking for donations for their seventh general convention," the entrepreneur said, urging the UCPN-Maoist led government to immediately stop the forceful donation drive as they cannot support political parties without an investment friendly environment and opportunity to operate industries at full capacity.

According to the central bank's report, industries were able to utilise only half their production capacity in the last fiscal year. "Industries were able to utilise only 58 per cent of their capacity in the last fiscal year 2011-12," the central bank report said.

The central bank has attributed the declining capacity of the industries to increasing labour cost due to frequent strikes, and rising prices of raw materials that have been posing challenges for domestic products to compete in the international market.

On top of that the forceful donation drive by the party that is in the government has largely discouraged entrepreneurs, the entrepreneur said, adding that the low confidence of the domestic private sector has also been making it difficult to attract foreign direct investment to the country.

The government talks of attracting foreign direct investment but it harasses the domestic private sector, according to another entrepreneur, who opined that without building confidence within the domestic private sector, it is not possible to attract foreign direct investment.

The private sector has also asked the government to provide security to their businesses and property, as they have been receiving regular threats for declining to provide donations to political parties.

"The government should either fix a minimum donation amount by bringing an Act or stop forceful donation," another entrepreneur said, adding that the Act will help them write the donations in the book, which will start a transparent practice and help ethical business practices.

"The government blames us for doctoring accounts but forces us to give them donations, which cannot be shown in the accounts," he added. "The government itself is promoting unethical practice and blackmailing us with raids, if we do not give donations."

Most entrepreneurs have switched off their mobile phones and stopped attending office due to security threat, he added.

Likewise, the increase in the number of parties in the country has also become a headache for entrepreneurs as they have to give donations to each of them. "More parties means more donations for us," the entrepreneurs said.

A fortnight ago, CPN-Maoist had also forced entrepreneurs to give donations for its seventh general convention.