Kathmandu, October 2:

Nepal’s progress towards strengthening non-tax revenue (NTR) to boost national coffer seems slow and ranks second lowest in the South Asian region. Though the NTR holds tremendous potential in revenue collection, it has not been effectively consolidated due to weak institutional mechanism and lack of accrual accounting system in the government rganisations.

Prof Dr Madan K Dahal, head of Economics Department at the Tribhuvan University (TU) commented that non-tax revenues are not effectively streamlined. He was of the opinion

that there is no consistency in the non-tax revenue, which occupies 20 per cent of the total revenue collection. “Whereas, the indirect tax in the country’s total revenue collection stands more than 60 per cent and the direct tax stands about 20 per cent,” he said. He said that “to see up in non-tax revenue, the growth of public utilities such as telephone service, water tariff and electricity revenues is a must. What is crucial is that unless development activities are increased, non-tax revenue will not see its hike.

Narayan Bajaj, president of Institute of Chartered Accountants of Nepal (ICAN) said that the government has to change its cash accounting system to accrual accounting to see effective non-tax revenue growth from the public enterprises. It is a paradox to state that Nepal still ranks second lowest in its non-tax revenue efforts in SAARC countries, states a latest survey conducted by Madhav Prasad Ghimire, a consultant for Economic Policy Network (EPN), a joint project of Asian Development Bank and the ministry of finance.

Bajaj proposed that once the cash accounting system is converted into accrual accounting, then the status of the accountability would come into a picture to correct the non-recovery of non-tax revenues.

What is concerning to Bajaj is that there is no single body responsible for collecting NTR. Penalties imposed by judiciary bodies are yet to be collected in many cases and there is nobody who is responsible for that. Prof Dahal observed that low status of economy has reduced the potentialities in increasing non-tax revenue as the development activities of the country are also at the low ebb. It is important to see increased development to see more non-tax revenues in today’s free market economy but the things are not moving in that direction, he said.

The study suggests that there is a need to introduce flexible interest and dividend policy, rescheduling of principal due from the public enterprises facing financial problems and introduce medium term rolling non-tax revenue plan. The weak non-tax revenue is attributed to constraints in institutional, policy, political and administration fronts, as per the views expressed by government consultants and private sector. If monitoring and reviewing mechanisms are enforced strongly, factors of non-tax revenue will generate more revenues to the national coffer.