Kathmandu, November 17
The government has expressed concern over the ‘Doing Business’ report prepared by the World Bank, which was unveiled on October 31.
At a programme organised on the occasion of the seventh National Tax Day in the Capital, Finance Minister Yubaraj Khatiwada, said that the report had painted a harsh picture of the trade and investment environment in Nepal. “We have spoken about our concerns regarding the report with the World Bank and it has assured us that the report will be revised.”
Nepal stood in the 105th position in the ‘Doing Business’ ranking last year but this year the country has dropped to the 110th position, hinting at a weakening state of trade and investment climate in the country as it has failed to simplify tax payment process.
“We have reservations on the report as our rank has been downgraded citing a minor issue related to tax. We have urged the concerned stakeholder to revise the report,” Minister Khatiwada stated.
The finance minister further mentioned that the World Bank has said it will send a special team to revise the report, adding that the government will make efforts to better the score.
The World Bank report has incorporated 190 countries around the globe in the list.
Nepal made paying taxes more difficult through a 2017 Labour Act that introduced employer-paid labour gratuity, medical insurance and accident insurance in a way that places a larger administrative burden on companies that are already facing considerable bureaucracy, says the World Bank’s Doing Business 2019 report. This has made the process of complying with tax obligations more cumbersome, adds the report titled, ‘Training for Reform’.
The labour gratuity is a ‘particular burden’ as employers must file and pay it manually every month whereas the medical and accident insurance is paid annually, according to the report. Nepal-based companies had to make around 39 payments and spend 353 hours to comply with fiscal obligations in 2017. This compares unfavourably with the global average of 24 payments and 237 hours, the report reads.
Nepal ranks 158th out of 190 countries in paying taxes sub-index of the Ease of Doing Business Index. Nepal’s performance in this area was the worst among 10 indicators that World Bank evaluates to rank the countries.
According to the report, Nepal also ranks low in other sub-indices of the Ease of Doing Business Index, with ranking in enforcing contracts standing at 154, dealing with construction permits standing at 148, and getting electricity standing at 137.
Nepal’s performance contrasts with the rest of South Asia where a total of 19 business reforms were made in the past year. The number of reforms made by South Asian countries last year was the second highest ever, says the report. The performance of South Asian nations was the best in 2016 when it made 21 reforms.
A version of this article appears in print on November 18, 2018 of The Himalayan Times.