The government has to look for alternatives to high customs tariff to make up for the revenue gap

Since Nepal joined the World Trade Organisation (WTO) in 2004, the government has kept the customs tariff rate on imports of around 40 products very high. This is against the commitment Nepal had made at the multilateral trade regime. Experts believe that excessive tariff rate can have negative repercussions on the trade policy review report being made by the WTO. Nepal trade policy review is going on and a WTO mission is scheduled to arrive for the second round of meeting in July. The first round of meeting was held in March. During that time, the Ministry of Industry, Commerce and Supplies was asked to bring down the applied rate to the level of the country’s commitment made to the WTO. The WTO may take actions against Nepal if it does not bring down the tariff rate as per its commitment to multilateral trade regime. The MoICS has already drawn the Ministry of Finance (MoF)’s attention to the need to revise the customs duty to the level pledged to the WTO. However, the MoF has not considered slashing the tariff to the pledged level even for those imports which have negligible weightage of the total imports. Even if tariff adjustment is made as per the WTO rules on negligible imports, there will be little impact on revenue collection.

The WTO mission will study the Financial Act, which will pass through Parliament by the time the mission arrives in July, prepare a report based on it and submit it to the world trade regime by the year-end. The report will be discussed from early next year. As a WTO member, Nepal has been receiving “aid for trade” and technical support from the WTO to develop its trade capacity. If the report finds non-compliance with the pledged commitment, Nepal may also lose zero-tariff export facility to developed countries. Nepal imposes high duty on automobiles and spares parts and liquor and tobacco products. Nepal had pledged to bring down customs tariff to 60 per cent on automobiles and spare parts. However, customs tariff is at 80 per cent, 20 per cent higher than the pledged level. Customs duty on automobiles and other goods are the major sources of the country’s revenue.

Shishir Kumar Dhungana, revenue secretary, however, insisted that the WTO should consider the “revenue need” of the least developed countries like Nepal. He blamed Nepal’s then negotiators for making “weak negotiations” during accession to the WTO. A few LDCs have been imposing up to 200-300 per cent tariff on liquor. But Nepal has imposed 100 per cent on it as per its commitment to the WTO. It is not that Nepal cannot impose high customs tariff on some specified imports. Nepal can impose high tariff on imports to protect domestic industries only under Anti-dumping and Countervailing Act. A draft bill to this effect was made a decade ago. But it could not be passed due to fierce opposition from importers and international lobbyists. In this backdrop, Nepal has no other option than to bring down the tariff rate to the WTO level. Bringing down the customs tariff may adversely affect revenue collection. The government has to look for alternatives to high customs tariff to make up for the revenue gap. One of the options may be raising excise on imports. But it must not exceed the excise imposed on domestic products.

Digital dividends

Information and Communication Technology (ICT) is increasingly becoming an integral part of our daily lives. ICT applications can also immensely help in improving our education and health care services. At an interaction on a research paper “Status and Implementation of Action Lines of WSIS beyond 2017” on Monday, stakeholders laid stress on applying ICT applications in education and health sectors for the larger benefit of the general public. WSIS (World Summit on Information Society) is a UN organisation that aims to bridge the gap between rich and poor countries by spreading access to internet in developing countries.

The research paper suggests improving teaching and learning within four years by providing internet connectivity to all primary and secondary schools. The suggestions are worth paying heed to. The fast-paced development of ICT has opened new avenues for its application in different sectors. Stakeholders’ call to focus on implementation of ICT must be given due attention by the government bodies and concerned agencies. It is time Nepal started coming up with proper programmes and policies to reap digital dividends by applying ICT in health and education.