Himalayan News Service

Kathmandu, January 17:

Increment in Value Added Tax by 30 per cent through the Ordinance Budget 2004-05 is going to stoke inflation in the country and exemplifies government’s inability to gauge country’s investment climate, plight of poor people and drop in productivity, feel most industrialists.

Confederation of Nepalese Industries (CNI), issuing a press statement, has stated that on the one hand the economy is trapped between conflict and political

instability, on the other, the government has increased VAT by 30 per cent through ordinance. This is going to hurt the economy more, feels CNI.

The country is moving in a wrong direction when it comes to government initiatives. The government has increased VAT to compensate expenses incurred from ‘security and salary’ hike of civil servants, said the CNI statement. This is the first time that the government has hiked the rate of main tax (VAT) by 30 per cent to recoup losses incurred from unproductive sectors,said the statement.

The industrial and investment climate in the country is currently negative. Due to hike in petroleum products prices, transportation cost and consumer products’ prices have already gone up, reads the press statement. CNI has demanded that the government reconsider the VAT rate hike.

Surendra Bir Malakar, second vice-president of Nepal Chamber of Commerce (NCC) told this daily that the private sector will not pay VAT from today and protest programmes have also been started in coordination with all chambers of the country.

Members of the private sector have already announced their resignation from the Revenue Advisory Committee (RAC) formed by the government under the ministry of finance.

Prasiddha Pandey, secretary General of Hotel Association (HAN), said that the government should have adopted alternatives measures instead of increasing VAT. The new decision will

have a greater negative impact on the tourism industry and other businesses.

Regarding the tourist service fee (TSF) of two per cent, he said that it has been transferred on to tourists who will pay Rs 500 each. “The ongoing activities of the government will definitely drive this country towards a bleaker situation, worse than what it is today,” he told The Himalayan Times.

Malakar informed that all chambers in the country have already supported the move taken by NCC on the issues of not paying VAT and organising protest programme.

The finance minister should keep the VAT rate at 10 per cent as before, and if he cannot do so he should be sacked as a cabinet minister, Malakar demanded.

Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has also joined hands with the other chambers in protesting against the hike in VAT rate.