Gopal Tiwari

Kathmandu, March 27:

A senior official at the Central Bureau of Statistics (CBS) and a prominent economist have strongly stressed on the effective revenue generating measures to bridge the resource gap.

As per the study — conducted by Dr Rudra Suwal, senior CBS official since 1974 broadening of tax base, reforming tax administration, simplifying tax procedures, decentralising tax system and coordination among tax agencies, are some of the components to bridge the resource gap for a country like Nepal. Suwal said that tax system has suffered from limited tax base, and the performance of tax rates has been poor. “Instead of reviewing the current tax system, tax net increment is crucial,” he suggested. Suwal mentioned that main reason for the failure of the public revenue system is the lack of co-ordination among the tax agencies.

“Tax administration system is rather weak, therefore, scientific mechanism is needed with an encouraging environment for tax personnel to wipe out irregularities”, he said adding that simplification of tax procedures is equally important. His study states that possibility of tax revenue through the improvement in tax system is quite high. Prof Madan K Dahal, head at the central department of economics, Tribhuvan University said that ‘resource mobilization is crucial to sustain economy. “Improving tax administration and maintaining financial discipline are prerequisite to see high revenues,” he said. “Our priority currently should be on crisis management not growth,” he added, “High revenue mobilization is need of the hour. At the same time, curtailing of productive expenses is also inevitable.”

As our tax system is centralised and most of the taxes are levied by the central government, local bodies do not seem to have more involvement in revenue collection and most of their current and capital expenses are financed by the centre, Suwal said. “The public sector should be thoroughly reviewed and redefined on the basis of ground realities which will ultimately help in reducing resource gap focusing on limited resources,” he suggested, “The government should play the role of a partner, catalyst and facilitator rather than the provider of economic growth in case of the production of goods and services to reduce overpressure on the expenditure.” Transparency and good governance may bring sound performance of the public expenditure thereby controlling corruption, Suwal opined.

Prof Dahal said that there is no tax on ‘salary’ in Sri Lanka. “We need to increase tax base to narrow down revenue expenditure by lowering the tax rates in compatible with WTO and SAFTA provisions,” Prof Dahal suggested. Institutional capacity of the government at every level seems weak, therefore, substantial increase in resource mobilisation is necessary to pay the government employees enough. It is realized that one of the reasons of corruption is inadequate salary, Suwal’s study suggests. “Public resource management would be more effective if the participation of beneficiary groups in decision-making at the local level and central level is encouraged,” suggested Suwal. Therefore, integrated approach for both the public revenue and expenditure should be adopted to resolve the problem of resource gap for high productivity.