Private sector criticises government for imposing heavy tax

The private sector today criticised the government for imposing heavy taxes.
Speaking at a programme organised to mark the 8th National Tax Day, they also said that the privaye sector has not been able to meet basic expenditures due to heavy taxes imposed on them.
Senior vice president of Federation of Nepalese Chamber of Commerce and Industries (FNCCI) Shekhar Golcha and president of Nepal Chamber of Commerce (NCC) Rajesh Kaji Shrestha complained the government for collecting heavy taxes putting burden on private sector.
Golchha, on the occasion, criticised the government for making the PAN card mandatory for all wage earners. “It has severely affected businesses of small entrepreneurs," he said, vowing to support the government in its bid to expand the base of the taxes. “We are ready to support the government in its campaign of achieving economic goals.”
Likewise, NCC president Shrestha urged the government to give relief to the industrialists and entrepreneurs by exempting unnecessary taxes on them.
Meanwhile, finance minister Dr Yuba Raj Khatiwada, on the occasion, said that the government is committed to creating a conducive environment for the private sector although industrialists are facing some challenges due to tax in the new federal set-up. He said that the government has introduced a new tax system to make the industrialists and entrepreneurs more responsible.
The finance minister said the government was making needful preparations to mobilise three-fourths of total taxes from internal sources. “The government is committed at increasing the share of internal resources even though it may be hard in the beginning,” he said, adding that  the government will make amendment to tax policy and law. “The economy is in a transitional phase and the business fraternity will be used to be with VCTS, PAN, and other ICT systems soon.”

VCTS to be fully implemented next fiscal only

The government and traders have reached an understanding to implement the vehicle and consignment tracking system (VCTS) in a full-fledged manner only from next fiscal year.
“The understanding has been reached – on the request of traders – to implement VCTS on a voluntary basis in the current fiscal year,” confirmed an official at the Finance Ministry.
A meeting between traders and Finance Ministry officials have agreed to implement the VCTS on a voluntary basis in the current fiscal year and make it mandatory – in goods trading – from the beginning of next fiscal year 2020-21, according to the Finance Ministry.
They also have agreed to form a committee to look into the effectiveness of VCTS in the current fiscal year. “The committee will study on ways to effectively implement the VCTS and practical challenges that could arise during implementation of the system,” informed the Finance Ministry that had implemented the web-based VCTS on July 17, to keep track of the cargo ferrying containers and trucks.
The government has implemented the digital tracking system primarily to control revenue leakages as the government can easily trace vehicular and cargo movements and transportation of goods through VCTS but could not make it mandatory in the current fiscal year as it had not done extensive discussions with the private sector before implementing it.
Though more than 30,000 traders and firms have registered themselves under the VCTS, more traders are against the abrupt implementation of the system citing difficulty in implementing it due to the difficult geography of the country and technical problems related to internet service. Some of the entrepreneurs have also protested claiming the abrupt implementation of the VCTS is ‘impractical.’
In response, the government has been flexibility in making the VCTS mandatory for traders.
However, over 10,000 consignments are being registered in the VCTS every day nowadays despite initial opposition from the private sector, according to the Department of Revenue Investigation (DRI).
After the VCTS will be mandatory, traders will be liable to fines of up to Rs 50,000 for the first time and Rs 75,000 for the second time, if they do not abide by the VCTS rules.

Government mulls introducing inheritance tax

The government is considering introducing inheritance or estate tax to widen parameter of revenues on wealth.
Speaking at an interaction on ‘Contemporary prospects and challenges of Nepali economy’ organised by Nepal Chamber of Commerce (NCC) in the capital today, finance minister Dr Yuba Raj Khatiwada said that the Finance Ministry is exploring various options for inheritance tax although it has not yet reached a decision.
The ministry is currently discussing on the modality of inheritance tax, he said, adding that the issue will be tabled at the to-be-formed Revenue Board, though the ministry is planning an extensive discussions before introducing such tax.
Though, inheritance tax is common in the developed countries, it could flare a negative debate in Nepal as according to culture, the children naturally inherit their parents property after death. The inheritance tax is levied on property inherited from person who has died. The inheritance tax rates are determined on the basis of various factors including the condition of the residence, property, total worth of the inheritance, and the beneficiary's relationship to the deceased. Several countries across the world including Britain and Japan have such tax. The tax is either imposed as duty on the estate of a deceased or as an inheritance tax on the inheritor.
Though, Dr Khatiwada didn't go into the details, inheritance tax could be one of the perfect tools to check corruption and red tape in the country. But the proposal for inheritance tax as it has been proposed at a time when the three tiers of government are being criticised for creating 'tax terror' to meet their resource needs, has sent negative message to the business and industry fraternity.
On one hand the government officials and political leaders are being blamed for misuse of government funds and tax paid by the citizen in luxury vehicles, foreign junkets and paying perks to people's representatives, on the other additional tax, in the name of inheritance, is not going to please the citizens.
After the country is federated into three tiers of government, they are under tremendous pressure to manage funds for their operations. The local and provincial governments have lately been imposing taxes arbitrarily to meet their funds needs.
Dr Khatiwada, on the occasion, also said that the government will not excuse traders and businesses that are found to be evading taxes. “The private sector undoubtedly is the major force to drive the economy and the intention of the government is to facilitate businesses, not to trouble them but businesses should abide by the legal framework,” he said, urging the traders to come and have discussions with the government regarding their concerns or any change in policies that is hampering business growth.
The minister also reminded the traders that the government is tightening imports to give a boost to domestic production and encourage exports.
Regarding the government’s recent move of implementation of permanent account number (PAN) and vehicle and consignment tracking system (VCTS), Dr Khatiwada said that their implementation will prove to be a boon for the economy in the long run.
But the NCC president Dr Rajesh Kazi Shrestha, on the occasion, said that the government should hold enough consultations with the private sector before introducing such business-related policies.

Auto dealers call for lowering tariffs to support growth

The dealers called for the lowering of the tariffs on the imports of automobiles.
The auto sales growth rate has dropped to 1.5 per cent from an average growth rate of 20 per cent to 25 per cent – from a year ago – also due to unclear and inconsistent policies, apart from high tariff on imports and government perception that automobiles are luxury goods, they said, adding that the drop in auto sales will hit the government treasury too.
“The slowdown in the growth of automobile business is not a positive sign, according to the immediate past president of Nada – the umbrella organisation of automobile dealers across the country – that is organising Nada Auto Show 2019 from the day after. The slow growth due to rising tariffs on imports of vehicles and tightening of credit flow to the auto sector has not only hit the business but also the revenue mobilisation target of the current fiscal year. The government gets nearly Rs 100 billion in revenue from the auto sector every year.
“The government has imposed a tariff of 255 per cent to 320 per cent on the import of automobiles.”
People, though can ride a car based on their capacity, the high tariff rate is curbing the rights of the people to ride a car, he added.
The failure of the government to expand the road network and build infrastructure are also some of the roadblocks for the smooth ride of the automobile business in the country. “The complaints that there are a lot of vehicles on the road which has caused traffic congestion, is just due to fewer and smaller roads in the country,” he said, adding that the successive governments have failed to spend the budget allocated for the construction of roads.
The recent government move to make permanent account number (PAN) mandatory, online-based vehicle and consignment tracking system (VCTS) and mandatory enrollment in the social security fund (SSF) scheme also made the doing business difficult in Nepal, Shrestha added.

Certificate of Origin to be issued online

Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Confederation of Nepalese Industries (CNI), and Nepal Chamber of Commerce (NCC) will be issuing Certificates of Origin (CoO) through online.
The NCC today organised a soft launch of the online system, whereas the FNCCI and CNI have already launched the system to make it easier for the exporters. CoO is necessary for the exporters to certify that the exportable products are originated from Nepal.
“Earlier, the traders had to wait for the office hours to issue the certificate,” NCC president Rajesh Kaji Shrestha said, adding that with the beginning of online system, the process can be completed within few hours during any time of the day.
“Though the online is yet to be integrated with payment mechanism, it will be collaborating with digital payment platforms like e-Sewa and Khalti soon,” according to Computer Association of Nepal (CAN) that has developed the online system of CoO for the FNCCI, CNI, and NCC. “The traders have to pay through banks and attach the voucher with the certificate for the time being.”
The private sector has hired staff to help traders with the system and the Ministry of Industry, Commerce and Supplies has also given them a month to get used to with the system. “From mid-August, using an online system will be mandatory to issue CoO, according to the ministry.
The system will also help the Department of Customs, Department of Industries, and central bank in checking the details on exports and transactions, Shrestha added, on the occasion.
According to the Ministry of Industry, Commerce and Supplies, the online system is a good step towards making paperless trade, and reduce hassles with no human face involved.
The Department of Customs – implementing a single-window system to facilitation trade and create business-friendly environment – has been integrating business processes with technology. The department has already been linked with 15 agencies in this integration process, and Vehicle Tracking Consignment System (VCTS) is one of its initiatives. The VCTS has been recently introduced as a trial for three months.

VCTS, to check revenue leakage, comes into operation

The government has brought Internet-based vehicle and consignment tracking system (VCTS) into implementation from today to track all parties involved in business activities, ranging from importers to consumers.
Finance Minister Dr Yuba Raj Khatiwada inaugurating the modern system amid a ceremony in Kathmandu today, said that the system, which will also be linked with the customs, all transportation companies, importers or entrepreneurs must have to make entry of their goods and consignments in a centralised website before transportation of goods from one destination to another inside the country with the enforcement of the tracking system. “The digital measure is aimed at combating revenue leakage,” he said, adding that the Internet-based entry will be required only for wholesale entrepreneurs.
According to Department of Revenue Investigation (DoRI) – with the implementation of the tracking system – importers and entrepreneurs will be able to get real-time update of the movement of their consignments. “The tracking system will ensure greater transparency in import business, check smuggling of goods and discourage the use of fake Value Added Tax (VAT) bill,” the department said, adding that the department will remove its all 10 check-posts across the country after the implementation of the new system.
The private sector leaders, however, said that they need some time for adaptation to the new system, though the VCTS is beneficial for truckers and entrepreneurs as it will end the hassles emanating from manual checking of documents during transportation. “Since Nepal does not have a reliable Internet system yet, the immediate and full-fledged implementation is doubtful,” the private sector said, urging the government to roll out the system in a gradual way.
However, the government has made the system mandatory. The department has warned that it will fine up to Rs 50,000 for those who violate the provision of mandatory entry of consignments in the website after three months of the new system coming into operation. However, the second time offender of the rule will face a fine of up to Rs 100,000.

Finance Minister inaugurates online tracking of vehicles

Despite the opposition from the transporters, finance minister Dr Yuba Raj Khatiwada today inaugurated Internet-based Vehicle and Consignment Tracking System (VCTS) – a system of tracking commodities sold in the market – in the capital.
With the enforcement of the tracking system, all transportation companies, importers or entrepreneurs must have to make entry of their goods and consignments in a centralised website before transportation of goods from one destination to another inside the country, the Finance Ministry claimed. The Internet-based entry will be required only for wholesale entrepreneurs.
“The details of all the goods that are taken from one place to another for a commercial purpose must be registered under a centralised information system before they are transported,” according to the VCTS that is aimed at combating revenue leakage.
The government claims that VCTS is beneficial for truckers and entrepreneurs as it will end the hassles emanating from manual checking of documents during transportation, the private sector has asked the government some more time for adaptation to the new system as the country has no reliable Internet system yet. Though the government has made the system mandatory, the private sector has urged to roll out the system phase-wise. “The immediate and full-fledged implementation of the system is doubtful,” said vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Umesh Lal Shrestha.
The Department of Revenue Investigation (DRI) has warned that it will fine up to Rs 50,000 for the violators of the mandatory provision of entry of consignments in the website after three months –mid-October – of the new system that came into operation from today. “However, the second time offender will have to pay a fine of up to Rs 100,000,” it adds.
According to the department, the tracking system will ensure greater transparency in import business, check smuggling of goods and discourage the use of fake Value Added Tax (VAT) bill that has seen a steep drop lately.
The system – which will also be linked with the customs – will track all parties involved in business activities, ranging from importers to consumers, according to the department. “With the implementation of the tracking system, importers and entrepreneurs will be able to get real-time update of the movement of their consignments.”
The department will also remove its all 10 check-posts across the country after the implementation of the new system.
The Office of the Prime Minister and Council of Ministers has issued a circular on the VCTS – on July 8 –saying that it will be effective from July 17.