Trading, corporate activities slow down

Though the government has no clear idea that trading and corporate activities have been slowed down or tax evasion has been increased – in the first 2 months of the current fiscal year – as a result the government failed to meet the revenue mobilisation target by over Rs 1 billion.
The Inland Revenue Department (IRD) has missed the revenue mobilisation target due to a slowdown in income tax collection and value added tax (VAT).
According to the department, it fell short by 4 per cent as the government was able to mobilise Rs 35.27 billion against the target of Rs 36.67 billion in income tax.
The department has been able to mobilise Rs 14.23 billion in income tax, which is 92 per cent of the target of Rs 15.46 billion. Corporate profit tax, remuneration tax and investment tax are the major sub-headings of income tax that the department collects as direct tax.
IRD spokesperson Yagya Prasad Dhungel said that the drop in income tax collection was a usual trend in the first quarter of the fiscal year, as a majority of taxpayers will not have filed their tax returns during this time.
Taxpayers need to declare and submit tentative tax returns in advance to the department.
Likewise, the department fell short of the VAT also. It has been able to mobilise Rs 12.90 billion achieving only 97 per cent of the target.
An increase in the number of cases of tax evasion recently had led to the drop in VAT collection, the department suspects. Proliferating use of counterfeit excise duty stickers and growing practice of not issuing VAT bills have led to slow revenue collection, though the department has however intensified market inspection from the past month.
The department has fined a total of 600 taxpayers for not paying their taxes on time. Likewise, it has started scrutinising 21 large taxpayers, who are suspected to have cheated the government by evading tax. The department has also instructed the concerned taxpayers to maintain updated transaction records and issue a VAT bill while making a sale.
However, excise duty collection exceeded the target. The department has been able to mobilise Rs 7.73 billion against the target of Rs 7.36 billion in the first two months of the current fiscal year.
Likewise, the department has also missed the education service tax and health service tax targets. The department has mobilised Rs 156.6 million in education service tax against the target of Rs 177.95 million and Rs 250.4 million in health service tax compared to the target of Rs 343.01 million.
The government has set a target of moblising Rs 299.91 billion through IRD in the current fiscal year.
Even as the tax authority was unable to meet the target for the first two months of the current fiscal year, the amount was an increase of 22 per cent against the same period of last fiscal year. Tax mobilisation under income tax increased by 17 per cent, VAT by 23 per cent, excise duty by 30 per cent, education service tax by 13 per cent and health service tax by 22 per cent in the first two months compared to the same period of the last fiscal year.

Two months’ revenue mobilisation
Title – Amount – Achievement
Income Tax – Rs 14.23bn – 92pc
VAT – Rs 12.90bn – 97pc
Excise Duty – Rs 7.73bn – 105pc
Health Service Tax – Rs 250m – 88pc
Education Service Tax – Rs 156.58m – 73pc

Budget to push more Nepalis into poverty

The expansionary nature of the budget for the next fiscal year is going to push more Nepalis into poverty, although the government has promised to reduce the percentage of people under the poverty line.
Currently, some 21.6 per cent of Nepalis are under the national poverty line, whereas the government aims to bring it down to 18 per cent, according to the budget for fiscal year 2016-17.
However, the government's distributive and expansionary budget is going to push more Nepalis under the poverty line, thanks to increasing inflationary pressure, said economist Prf Dr Bishwhambher Pyakuryal.
Finance Minister Bishnu Poudel yesterday presented a budget of Rs 1,048.9 billion for fiscal year 2016-17 in Parliament, with an aim of reducing poverty, increasing economic growth and preparing the base for a prosperous Nepal, apart from implementation of new Constitution.
But the hike in the salary of government employees by 25 per cent and grade – making it to around 40 per cent salary hike in total including increased grade – and various distributive programmes in the budget will push market prices up, he said, adding that while the salary hike could be justified as the cost of living is increasing, the impact of the hike on the market will hit non-government employees and daily wage workers hard. "People who earn their living from day to day wage are most at risk of falling back into poverty will be dragged below the poverty line."
The 13th periodic plan that had aimed to bring the poverty rate down to 18 per cent failed mainly because of the failure of successive governments to create employment in the country and also rising inflation over the last three years. "Likewise, inflation fuelled by expansionary fiscal policy will again thwart the government's poverty reduction target," he added.
The 'socialist-oriented budget' has doubled the social security blanket and placed an extra burden on state coffers. This may have been necessary, but the distribution of the budget across all the 'dream projects' would not contribute to capital formation and increased productivity, according to former finance secretary Rameshwor Khanal."This could be disastrous for the economy," he added.
Likewise, the budget – that claims to strive for a self-reliant economy but has been overly dependent on foreign grants and loans, and also revenue from imports – has also failed to enhance market monitoring capabilities and crack the whip on price inflation.
The deficit budget, which aims to mobilise Rs 565.9 billion from revenue – mostly from the imports like customs, excise and VAT – has failed to introduce any radical reform in the revenue administration. Citing the examples of economic crisis in Greece and Venezuala, Khanal claimed that the estimation of large revenue without any sustainable base could lead to disaster.
Similarly, the budget has estimated Rs 10 billion to come through principal repayment and Rs 106.9 billion through foreign grants. The resulting deficit will be financed through foreign loans of Rs 195.7 billion, domestic loans of Rs 111 billion and Rs 59.4 billion from savings of the current fiscal year.

Excise duty fails to meet target but revenue mobilisation exceeds target

Though the excise duty mobilisation failed to meet the target, revenue mobilisation has exceeded the target for the fourth month of the current fiscal year 2013-14.

The Inland Revenue Department has been able to mobilise Rs 31.32 billion revenue in the four months – mid-October to mid-November – of the current fiscal year against the target of Rs 31.22 billion, the department said, adding that income tax and VAT mobilisation stood at 101 per cent of the target, whereas excise duty mobilisation stood at 99 per cent.

The department has been able to mobilise Rs 12.70 billion (target Rs 12.63 billion) under income tax, Rs 10.70 billion (target Rs 10.62 billion) under VAT, Rs 7.35 billion (target Rs 7.74 billion) under excise and Rs 123.6 million (of the target Rs 90.3 million) under education tax, said the director general of the department Tanka Mani Sharma.

In the third month of the current fiscal year 2013-14, the revenue mobilisation had stood at Rs 27.07 billion.

Meanwhile, the department today organised a interaction with the auditors under its taxpayers awareness programme.

Sharma, on the occasion, requested the auditors to play a role of the facilitator between the revenue administration and the taxpayers.

Seeking the auditors assistance in making the Tax Fair on Tax Fair on January 5-8 a success, he called the auditors to help the taxpayers aware of their duties and better revenue mobilisation.

Total revenue mobilisation exceeds target despite VAT, customs, excise duty mobilisation shortfall

The government has been able to mobilise Rs 24.66 billion revenue exceeding its target by Rs 1.38 billion– which is 105.96 per cent of its target Rs 23.28 billion – in the first month of the current fiscal year 2013-14 due to timely budget and reforms in the revenue administration.  

However, the revenue mobilisation is 28.87 per cent more compared to the first month – between mid-July and mid-August – of the last fiscal year 2012-13, when it had mobilised Rs 19.15 billion.

“The increase in the revenue mobilisation is also due to private sector’s coordination and timely reforms,” said finance secretary Shanta Raj Subedi.

Though, the total revenue mobilisation has been encouraging in the beginning of the fiscal year 2013-14, it has missed VAT, excise duty and customs duty targets, according to the Finance Ministry.

Due to slowdown in imports duty, customs mobilisation stood at Rs 4.69 billion, from the target of Rs 5.03 billion, for the month, though it is 17.73 per cent higher compared to the same month of the last fiscal year.

Similarly, VAT mobilisation also stood at Rs 9.29 billion, which is 3.5 per cent less than the target, though it is 17.03 per cent more than the first month of last fiscal year, due to low domestic production, the ministry added.

The government also fell short of excise duty target by around eight per cent to Rs 2.99 billion against the target of Rs 2.98 billion – due to low excise in imports compared to the local production – though the government has been able to mobilise some 24.46 per cent more than last fiscal year’s first month.

But the government has seen an encouraging mobilisation of income tax as its collection stood at Rs 4.03 billion, up by Rs 727.3 million – some 22 per cent – compared to the month’s target. “It is some 29.22 per cent more compared to the collection of the same month of the last fiscal year,” it said, attributing the growth to the increased house rent and other taxes. “Likewise, the government has been able to mobilise Rs 2.24 billion under registration, vehicle and other taxes.”
Likewise, the tax revenue mobilisation is three per cent and non tax revenue is 94.9 per cent more than the target for the month,” the ministry said, adding that the tax revenue is 27.4 per cent and non-tax revenue is 58.7 per cent higher than the first month of the last fiscal year.

Government needs only Rs 32.14 billion in a month to meet revenue target

The government needs to mobilise only Rs 32.14 billion in the last month of the current fiscal year as by the 11th month (mid-June), it has already mobilised Rs 257.46 billion revenue against the annual target of Rs 289.60 billion.
At a time when the government has been failing to spend development expenditures swelling its treasury by over Rs 50 billion, revenue mobilisation by mid-June has posted some 22.04 per cent increment compared to the same month last fiscal year, the Finance Ministry's figures revealed.
The government has been able to mobilise Rs 225.85 billion under tax revenue and Rs 31.61 billion under non-tax revenue making it a total of Rs 257.46 billion by mid-June, it said, adding that the growth rate of revenue has been encouraging despite no changes in the tax rates for the current fiscal year due to the delayed budget amid the political turmoil.
"In a month from mid-May to mid-June, the government has been able to mobilise Rs 19.20 billion under tax revenue and Rs 3.80 billion under non-tax revenue making it a total of Rs 23.01 billion, which is an increment of 10.18 per cent compared to last fiscal year's 11th month."
The ministry has attributed the growth in revenue mobilisation to increasing contribution of the service sector, reform in revenue administration and plugging the loopholes in revenue leakages.
The growing contribution of VAT and income tax in the revenue is a positive signal, according to the ministry that is planning to increase some 35 per cent in revenue target, though the private sector is critical of the government's revenue-obsession but lack of appetite in development expenditure.


Sectoral distribution
VAT -- Rs 75.45 billion
Income tax -- Rs 54.62 billion
Customs -- Rs 51.35 billion
Excise -- Rs 32.56 billion
Non-tax and others -- Rs 34.76 billion
Registration fee and vehicle -- Rs 8.72 billion
(Source: Finance Ministry)

High import propels revenue mobilisation

Increased import of petroleum products, vehicles, readymade garments and telecommunications equipment has propelled customs revenue pushing the overall revenue mobilisation up in the last month, according to the Finance Ministry.

The exemption of Indian excise has also boosted customs revenue, it said, adding that reforms in customs valuation and tax administration, coupled with leakage control drive have also contributed to the encouraging revenue mobilisation.

Despite the political transition, the expansion of the service sector apart from fewer strikes and bandhs have also helped boost non-tax revenue mobilisation, according to the ministry.

In the nine months till mid-April of the current fiscal year, the government has been able to mobilise Rs 210.46 billion revenue — some 22.30 per cent higher — compared to the same period of last fiscal year 2011-12, when the government had been able to mobilise Rs 172.09 billion, the ministry said.

The highest grosser, due to increased imports as usual, has remained value added tax (VAT) with Rs 60.33 billion, followed by income tax (Rs 48.26 billion), customs (Rs 41.64 billion), and excise (Rs 26.19 billion), apart from non-tax revenue (Rs 26.35 billion), registration fee and vehicle tax (Rs 7.13 billion) and education tax (Rs 242.6 million) by the first nine months of the current fiscal year.

Likewise, the growth rate of customs — due to increased imports — and income tax has been highest at 38.89 per cent and 31.12 per cent, respectively, compared to the same period of last fiscal year, the data revealed, adding that education service tax, though small in amount, has also recorded a 43.2 per cent growth in the nine months of the current fiscal year as compared to the same period last fiscal year.

In the ninth month alone (mid-March to mid-April), the government mobilised Rs 32.49 billion revenue, including Rs 29.85 billion tax revenue and Rs 2.63 billion non-tax revenue, the ministry said, adding that total revenue mobilisation has been encouraging due to growing imports. 

Sectoral contribution

VAT – 29 per cent

Income tax – 23 per cent

Customs – 20 per cent

Excise – 12 per cent

Non-tax and others – 13 per cent

Registration fee and vehicle tax – 3 per cent

(Source: Finance Ministry)

Comparative growth

Sector – FY 2011-12 – FY 2012-13

VAT – Rs 52.43 billion – Rs 60.63 billion

Income tax – Rs 36.80 billion – Rs 48.26 billion

Customs – Rs 29.98 billion – Rs 41.64 billion

Non-tax and others – Rs 25.25 billion – Rs 26.35 billion

Excise – Rs 21.73 billion – Rs 26.19 billion

Registration fee and vehicle tax – Rs 5.71 billion – Rs 7.13 billion

Education tax – Rs 169.4 million – Rs 242.6 million

Total – Rs 172.09 billion – Rs 210.46 billion

 (Source: Finance Ministry)

Entrepreneurs seek minimum limit on 'drunk driving'

Liquor manufacturers and distributors, and restaurant entrepreneurs have urged the government to amend the current Motor Vehicles and Transport Management Act 1993 — that has strictly prohibited 'drunk driving' without fixing the minimum limit — as the current Act has hit the liquor business.

The current movement of Traffic Police against drunk driving is good, but it has to be amended according to international standards, they said, adding that the current drive has hit liquor sales as the Act has not fixed a minimum limit, as is the international practice.

"We are planning to hold discussions with concerned authorities including the Traffic Police on the proposed draft," said president of Restaurant and Bar Association Nepal Tejendra Nath Shrestha, adding that a person will be allowed to consume up to 120ml of liquor and two bottles of beer, according to the proposed draft. "If anyone drinks above the minimum limit and drives, the Traffic Police should fine them."

Internationally, drunk driving has a minimum limit that varies from country to country. "In the US, one can drink 80ml and drive, whereas the minimum consumption limit is 50ml in Germany, and 60ml in Australia," Shrestha added. "Likewise, India has fixed a minimum consumption limit of 30ml."

The Rs 11.70 billion worth domestic liquor industry is not only a business in Nepal, he said, adding that it also holds cultural importance in every occasion from birth to death depending on the community. "The amendment will not only support the current drive against drunk driving but also help industries grow," said the association's general secretary Pramod Kumar Jaisawal.

According to the Nepal Liquor Manufacturers’ Association, the country manufactures liquor worth Rs 11.70 billion, whereas liquor worth some Rs four billion is imported annually.

"The current drive against drunk driving is positive socially as it has reduced fatal road accidents of late, but the government must think economically too and find a win-win solution for both manufacturers and the government," according to Nepal Liquor Manufacturers’ Association.

The drop in sales by around 30 per cent to 40 per cent has also hit revenue mobilisation, it said, adding that the government failed to meet its excise duty and VAT mobilisation target also due to low consumption of liquor of late.

 

New committee

KATHMANDU: Industrial Promotion Board, last week, formed a committee under a joint secretary to revise the old standards of issuing licence to liquor industry and update it taking stock of various changed contexts including environmental, social, prospectus of foreign direct investment and flow of investment from productive sectors to unproductive sector, before issuing the licence. "Some 110 applicants — including leading business houses — have applied for licences to open new liquor factories at the Department of Industry  promising more than Rs 18 billion investment," the department — that has sent the applications to the board for approval — said, adding that the number of liquor companies will increase as the government had three months back decided to issue licence to new liquor manufacturers, after a 11-year old ban on liquor licence. The government had, in October 2001, decided to stop providing licence to new liquor manufacturers. The department data revealed that only 10 — out of 15 big and medium-sized liquor factories registered with the department — are in operation currently.