Nepal | July 06, 2020

Businesses start paying taxes though not obliged to

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Though the Supreme Court (SC) had asked the government not to compel businesses to pay their tax dues before one month after the lockdown is completely lifted, taxpayers who are in position to pay their dues have started clearing it amid the government under pressure to manage different financial liabilities.

On June 11, the apex court had directed the government not to implement the notice issued by the tax authority that compels taxpayers to clear their dues amid the unfavourable circumstances resulted by the COVID-19 pandemic and asked the government to make necessary arrangements for businesses to pay their tax dues within 30 days after the lockdown is completely lifted. This means taxpayers are not obliged to pay tax as of now as the lockdown is still in force.

However, major taxpayers like Nepal Telecom, Ncell, Surya Nepal, Nepal Telecommunications Authority, among other large businesses, have started clearing their tax dues.

“As both the government and the private sector are reeling under pressure to manage financial resources in this day, it is the responsibility of both parties to heal each. While the government should not force businesses severely affected by the COVID-19 to clear the dues, those businesses/firms in position to pay their taxes should clear it and help the government,” said Shekhar Golchha, senior vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

As per tax authorities, the flow of taxpayers has increased in the last one week period.

During a parliamentary meeting last week, Finance Minister Yubaraj Khatiwada had said that the government is under pressure to manage financial resources owing to tepid revenue collection.

Moreover, he had also said that the government is finding it difficult to even meet its recurrent expenditure.

Khatiwada’s statement seems to have encouraged taxpayers to clear their dues.

Jhalak Ram Adhikari, chief of the Large Taxpayers Office (LTO) said that tax collection has increased since mid-June. As per him, telecom firms, large corporate houses, large industries, banks and financial institutions (BFIs) have been clearing their tax dues in the recent days, especially value added tax (VAT) and income tax.

“Revenue of almost Rs 10 billion has been collected in the last one week,” said Adhikari.

While Surya Nepal has paid Rs 900 million in taxes recently, private telecom firm Ncell has paid Rs 1.22 billion in taxes to the government.

Likewise, Nepal Telecom (NT) and Nepal Telecommunications Authority (NTA) have paid Rs 920 million and Rs 1.22 billion in taxes, respectively.

Because of the coronavirus contagion and the lockdown which prevented business activities, the revenue collection this year has been sluggish. As a result, the government is using different tools to manage financial liabilities, including internal borrowing, reallocation of resources and cutting down budget for low priority programmes and projects.

The government has so far already collected more than Rs 165 billion through internal borrowing, and it is also reallocating resources from different funds.

While the government has already reallocated Rs five billion from Rural Telecommunication Development Fund (RTDF) of NTA, it plans to downsize the fund by reallocating another Rs 11 billion by the end of this fiscal. Currently, the RTDF has almost Rs 20 billion, which is collected from service providers for the development of rural telecommunication infrastructure.

Similarly, it has also adopted austerity measures in the budget for upcoming fiscal by halting budget for unnecessary programmes and scrapping most allowances for civil servants.

A version of this article appears in e-paper on June 25, 2020, of The Himalayan Times.

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