The government has decided to introduce VAT refund for tourists from May 2005. Any international tourist, who is not employed in Nepal for the past six months and has not stayed for more than 183 days in Nepal can claim a VAT refund for anything purchased here worth more than Rs 15,000. The offer remains valid for 60 days from the date of purchase. The Ministry of Finance has walked this extra mile to lure visitors as the sharp decline in tourist arrival has had a big impact on tourism industry. Tourism is a major revenue spinner for Nepal and visitors are the backbone of even other industries — airlines, tour and trekking agencies, national parks and so on. The Ministry of Culture, Tourism and Civil Aviation has been doing all it can to lure more visitors. Only recently, the Nepal Tourism Board allayed fears that the insurgency and the state of emergency which have been blamed as tourism deterrents need not be feared. For the time being, the scheme will be operative for tourists leaving Nepal from Tribhuvan International Airport.

The offer acknowledges that tourists do help boost the national revenue. The VAT refund decision is a magnanimous gesture in principle which also respects the sentiments of other peripheral sectors that depend on visitors for existence. At present, the hotel industry is severely affected and several resorts have been battling financial crisis. Though the popularity

of the move is yet to be ascertained, a promotional package for visitors to Nepal would is a good lurer. However, the new move is not free from idiosyncrasies that such freebies are normally associated with. The possibility of gaming the whole VAT refund system at the airport by fraudulent means cannot be ruled out. And undue delays in verifying the authenticity of the claim would be an unproductive hassle which might turn off the tourists than lure them. A sound mechanism for swift verification of the claim alongside VAT refund will have to be devised and put in place.

If the refund gesture is a welcome one which the revenue department must comply with, the latter needs to tighten its grip on the other wings of revenue collection. The Department of Revenue Investigation has been able to recover over Rs 125 million in taxes that normally went unpaid by various firms and traders in the last nine months. The custom offices have collected over Rs 24 billion in the current fiscal year, which means a better performance than that of last year. The tax net needs to be widened. Anyone caught in it cannot evade it later. After tapping revenue sources to the hilt, it makes sense to consider promotional packages for tourism promotion. Different agencies of the government must join hands for improved impact and result.