The taxpayer must feel that the tax being paid will be utilised for the well-being of fellow citizens and not squandered

Only a strong tax base will generate enough revenue to propel the economy forward. For a country the size of Nepal, it should have been able to generate a lot more revenue than it currently does, were it not for the loopholes in the taxation system and tax administration, which have encouraged tax evasion and revenue leakage without much fear of retribution from the government. Inability to generate enough revenue means the state has no option other than to rely on grants and loans, raised domestically or through bilateral and multilateral channels. But the problem with raising taxes does not lie solely with the taxpayers. They too have their own grievances, to which the government has only paid lip service to solving them for years. The new Finance Minister, Janardan Sharma, has, however, assured the business community that the tax administration would be made systematic and accountable to the public. Addressing a function on the occasion of the 10th National Tax Day, the minister said a mechanism would be formed immediately to tackle any obstacle or hassle in the tax administration on the spot. To begin with, a vehicle scanner is to be placed at each of the customs offices to facilitate the customs process.

Undoubtedly, policy reforms in the tax administration to broaden the tax net would yield a lot of revenue for the government. Take the example of the real estate business, whose annual turnover is worth billions of rupees. However, nearly all of the buying and selling of land and property is done informally through thousands of brokers, who make good money from the deals worth millions of rupees each but pay no taxes to the state. If the real estate transactions were to be allowed only through formally registered firms, the government would be generating revenue from the buyer, seller and the go-between.

In some countries, all real estate business must be handled only through a law firm. There is also the landlord who charges exorbitant rents but pays pennies to the local government. It is common knowledge that renting space in business districts like New Road or Thamel in Kathmandu costs a fortune, but the lessor is unlikely to reveal the real amount. What about introducing a law that will give the government the first right to rent any house or space that is on offer? Tax evasion will continue as long as stringent laws to punish evaders are not introduced pronto. What more do you expect when the government is unable to take stern action against big business houses that used fake Value Added Tax (VAT) bills to evade taxes? Taxes should be such that they are paid voluntarily by the taxpayer, without the authorities having to force them to do so. But this will happen only when the taxpayer feels that the tax being paid will be utilised for the well-being of fellow citizens and not squandered. The government must also create an environment where tax payment is hassle-free, which is not the case as one experiences while paying, for instance, vehicular taxes. The finance minister has given word that a mechanism would be in place soon to address the taxpayers' complaints. It remains to be seen if there will be any change in the attitude of the taxpayer.

Identity politics

With the country restructured on federal lines, identity politics has taken roots at the grassroots level, overtly affecting even the National Population Census-2021 that began from November 11.

Every community wants to be identified distinctly based on its language, religion and culture. It is believed that as many as 123 languages are spoken all over the country by more than 127 ethnic communities.

Each wants a distinct identity because of facilities, such as reservation and quota in higher education and government services that the state provides to them based on their ethnicity.

However, enumerators have now encountered problems while collecting data in the Tarai and hilly regions. Some landless and Dalit communities in the Tarai have refused to provide information about their family status citing lack of citizenship papers while the Kayat community in Baglung's Dhorpatan area, famous for wildlife hunting, has also refused to cooperate with them until it is recognised as a separate indigenous nationality. Once a community is recognised as a distinct ethnic group, it enjoys the reservation.

The identity issue should have been resolved long ago, well before the constitution was drafted.

A version of this article appears in the print on November 19, 2021, of The Himalayan Times.