Hike in VAT rate angers private sector

Himalayan News Service

Kathmandu, January 14:

Reacting to the hike in VAT to 13 per cent, effective from today from an earlier 10 per cent, the private sector has termed it ‘unjustifiable’ as it came through an ordinance budget in the middle of the current fiscal, while the country is facing an economic crisis of sorts.

Commenting on the increment in VAT rate, Prof Dr Bishwambher Pyakuryal, senior economist and member of Revenue Advisory Committee of the ministry of finance said, “Increasing VAT in this difficult economic environment will put extra burden on the consumers when there is already a price hike in consumer products due to petroleum products’ price rise.” He was of the opinion that the government should have adopted some other alternatives to recoup revenue losses that may be in the form of increasing tax net, ensuring tax compliance and reviewing ‘exemptions’ given in various forms to the taxpayers.

Major business organisations namely Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Nepal Chamber of Commerce (NCC) boycotted the ‘budget ordinance’.

FNCCI, issuing a press statement today, has condemned the government decision to increase VAT to 13 per cent. The business sector has demanded with the government to revoke the decision immediately. Surendra Bir Malakar, vice-president of NCC told this daily that business sector would start protesting against the government decision on VAT, which is up by three per cent compared to previous years. “It is an unjustifiable decision which will backfire on the government itself,” said Malakar.

However, Confederation of Nepalese Chambers of Commerce and Industry (CNI) attended the function. Jagdish Agrawal of CNI commented that the increment in VAT by three per cent will ultimately put an extra burden upon consumers, which will increase the prices of all consumable items. It will fuel inflation, he commented. Sanjeev Puri, chief executive officer of Surya Nepal, commented that the government should have adopted alternative means for revenue mobilisation by focusing on tax compliance and tax net expansion instead of VAT rate increment.

In the beginning of the current fiscal year (2004-05), the government had allocated Rs 67 billion 608.431 million for current expenditure while Rs 31 billion 577.521 million had been appropriated for capital expenditure.