Kathmandu, October 31

Nepal slipped five places in the latest global ease of doing business index to land at 110th position, as it failed to simplify the tax payment process.

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 released today. 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.

“Nepal’s revenue collection must go up to cover social expenses. But it will be critical to find ways to do this without exerting too much burden on companies. Too much of paperwork eats into time and resources of companies, hitting job creation and plans to spread prosperity,” said Faris Hadad-Zervos, World Bank country manager for Nepal.

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.

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 countries was best in 2016 when it made 21 reforms.