Kathmandu, December 27, 2005

The government is planning to impose value added tax (VAT) on foreign employment, a move likely to face strong opposition from manpower agencies. The ministry of finance is planning to charge 13 per cent VAT on payment being made by workers to manpower agencies with effect from January 14 next year, when the government announces the budget through an ordinance. “Manpower agencies are being brought under the VAT regime to make sure that their dealings are transparent and to avoid innocent migrant workers being duped,” a government source said. However, manpower agencies are sure to go up in arms against the government’s move. They argue that levying VAT on foreign jobs is ‘ironical and worthless’. “Manpower business is not like trading in goods or other services,” said Nirmal Gurung of the Nepal Association of Foreign Employment Agencies. He argued that the government’s proposed plan would discourage the foreign employment sector, which has been a backbone of the national economy. He also said that manpower agencies would organise a series of protests if the government imposes VAT without prior consultation with the concerned stakeholders. According to official statistics, about 800,000 Nepalis are working in various countries.

Disputes to be solved by third party mediation

During the 10th Trade Negotiation Committee (TNC) meeting of BIMSTEC that concluded in the capital yesterday, member countries namely Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand, have agreed for the involvement of third party arbitration (third country) in dispute settlement mechanisms on trade issues. Naindra Prasad Upadhyay, chief of the Nepali delegation and joint secretary at the ministry of industry, commerce and supplies while talking to The Himalayan Times said, “The TNC meeting concluded successfully as we have reached an understanding for the involvement of third party arbitration in settling trade disputes.” The dispute settlement issue had been pending for long as to how a third country can be involved in bilateral trade disputes. This time, the meeting could discuss in detail, which has helped all member states to unravel the knot and agree to implement the new deal fro-m July 2006, says Upadhyay. Third party involvement is required in discussing the import surge, countervailing duty on other issues that directly affect foreign trade, he says. Similarly, the 10th meeting had discussed about rules of origin. Under the rules of origin, ‘valuation and product specification rules’ are yet to be settled. According to informed sources, the Nepali government is trying to make valuation at 25 to 30 per cent and gradually reduce the list of products kept in the negative list.