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)