NOC oil tax : No legal base whatsoever
NOC oil tax : No legal base whatsoever
Published: 12:00 am Dec 08, 2008
On December 3, the Nepal Oil Corporation, a state run monopoly, in a specially arranged press conference, announced, as expected, the reduction in the price of petrol, diesel and kerosene by Rs. 5 per litre with petrol now costing Rs. 85 per litre compared to Rs.100 when the world market price was three times higher. At the same time, the Managing Director of the Nepal Oil Corporation announced, “We have decided to impose a tax of 50 paisa on the sale of every litre of the three petroleum products in the Valley. The surplus funds thus raised will be used to control pollution in the Valley”. I was surprised by the announcement of the new tax and had hoped that it would be opposed by the Ministry of Finance itself if not by the members of the Legislative Assembly which also consists of two former finance ministers and a former governor. The reason is that it is an unconstitutional act.
The Nepal Oil Corporation or any other institution for that purpose has no right to impose a tax on the public, however good the purpose may be, without the prior approval of the Legislative Assembly. It is clearly explained in Part Nine of the Interim Constitution. Surprisingly, there was no reaction whatsoever from both the executive and the legislative bodies.
With the Nepal Oil Corporation tax, petrol now costs Rs. 85. 50 per litre, with Rs. 0.50 being the tax imposed by Nepal Oil Corporation. The amount of tax, of course, is not high; the total receipts from the tax, however, will be more than a billion given the base of the tax which is the consumption of three petroleum products. The Legislative Assembly was in session on December 4 but the discussion revolved around the curent global financial crisis, a topic more suitable for academic research at present.
The purpose of the tax as stated by Nepal Oil Corporation is not controversial either but it is not the task assigned to it. We have separate Environment, Science and Technology Ministry to deal with environmental matters whose annual programmes for the current year were recently approved by the parliament. Nepal Oil Corporation is a public enterprise and it cannot expand its task and authority at its own pleasure.The fiscal system of Nepal is similar to countries with parliamentary system of government; the constitutional provision secures fiscal control by the parliament. The constitutional provision has authorized imposition of a tax only in accordance with the legal provision which has to be approved by the parliament.
That right is normally provided to the Minister of Finance who imposed that right through the annual budget. There is a provision of, as we all know, supplementary budget if the Minister of Finance, as a coordinator of public sector financial activities, wants to make changes in tax or expenditure some time before due date. The public sector receipts and expenditure are audited by the Auditor General after the completion of the fiscal year. The receipts from so-called pollution tax by the Nepal Oil Corporation will, in fact, be a non- budgetary receipt. Now the basic question is: How will these receipts be managed, used and, most importantly, is there any plan or programme approved by the responsible agency, for example, the
National Planning Commission, for implementation?
By the same token, who will have the authority to approve the expenditure and who will audit the expenditure of the non-budgetary revenue and expenditure? It is not an exaggeration to say that Nepal Oil Corporation is openly challenging the authority of the Ministry of Finance,
National Planning Commission, Ministry of Environment, Science and Technology, Auditor General and, of course, the Legislative Assembly itself.
In fact, these types of activities were, with the support of the politicians, widely practiced during heyday of the Panchayat.
The most important tax at that time was so-called ‘sports tax’ which was collected by the Sports Council and was used at the pleasure of its Secretary mostly for political purposes, especially to suppress opposition groups of the Panchayat system. No audit was ever conducted of both revenue and expenditure. I guess we don’t want to follow the same Panchayati route and purpose.
Otherwise, as non-budgetary revenue such receipts will have to be deposited by opening a separate account in a commercial bank, and no one knows yet how the resources that are expected to be not less than a billion will be used or misused. The public have no option but to accept the decision in the hope that the responsible agencies will act soonest to correct the mistake of Nepal Oil Corporation. It is therefore a sincere matter for Nepal Oil Corporation to consider and to cancel the so-called pollution tax and surrender the receipts collected so far from the public to the appropriate agency.
Dr. Pant is executive director, Institute for Development Studies