Finance Ministry plans to expand tax base

SHIROMANI DHUNGANA

KATHMANDU: The government is preparing to introduce a revenue policy to strictly control informal economy to help expand the tax base rather than increase the tax rate.

“The ministry is looking at new and unidentified areas to expand the revenue base,” director general at the Inland Revenue Department Tanka Mani Sharma said, adding that the tax administration has specially targeted small and medium enterprises for evading tax compliance. “The budget for the fiscal year 2012-13 will focus in bringing the shadow economy under the tax net.”

The budget for fiscal year 2012-13 will bring a clear policy to address the problems of informal economy, Sharma added. “The government is introducing a special policy to curb informal economy, he said, without elaborating on what kind of policy the ministry will introduce.

Due to increased size of the budget from the ceiling of National Planning Commission also the Finance Ministry is under pressure to increase the revenue base.

“The ministry is mulling to bring companies of the Information and Technology (IT) sector and e-commerce under the tax net to expand revenue base,” he added.

However, the ministry opined that the current growth of revenue is due to various circumstances rather than an expansion of the country’s tax base. “The government is close to meeting its revenue target for the current fiscal year not due to the expansion in productivity but due to the rise in the value of the US dollar also,”said joint secretary at the Revenue Advisory Committee division of the ministry Rana Bahadur Shrestha.

The value of the US dollar increased to Rs 92 in the middle of the current fiscal year against Rs 72 in the beginning, he said, adding that the government would have certainly failed in meeting its target, if there was no steep rise in the value of the dollar.

Government has targetted to mobilise Rs 242 billion revenue for the current fiscal year, which is ending on July 15.

The government must lower customs tariff every year according to its commitment with the World Trade Organisation, he said, adding that the government will face problems in mobilising revenue since the domestic economy relies heavily on imports.

However, the Value Added Tax (VAT) and income tax mobilisation trend is encouraging. “The country could witness a 34 per cent increment in domestic taxation till the 11th month of the current fiscal year, informed spokesperson at the ministry Rajan Khanal. “The growth rate of revenue under income tax was 22 per cent and VAT was 14 per cent,” said Khanal.

However, the satisfactory growth of domestic revenue mobilisation was due to the completion of the investigation of the multi-billion VAT-scam that contributed a huge chunk to the national coffers, Khanal added.

The government projects a revenue growth rate of 15 to 20 per cent every alternate year in its budget, he said, adding that the budget for the fiscal year 2012-13 will also have 20 per cent increment in the revenue target, which means the government will have to mobilise Rs 290 billion revenue for the next fiscal year.

“The government can face problems of revenue shortfall, if it fails to introduce new areas of intervention like in the VAT-scam,” he said, adding that the expansion of tax base is key to meet the target.