Arrival of foreign tourists may drop due to the imposition of VAT on int'l air tickets
The Nepal Association of Tour and Travel Agents (NATTA), the umbrella organisation of the travel and tour industry, has urged Finance Minister Prakash Sharan Mahat to withdraw the decision to impose a 13 per cent Value Added Tax (VAT) on international air tickets and five per cent service tax on outbound tour packages. Finance Minister Mahat, while presenting the fiscal budget for the year 2023- 24, proposed imposing the 13 per cent VAT and five per cent service tax on tour packages. The NATTA officials fear that the VAT will raise air ticket prices, and subsequently see a drop in tourist arrivals. They have expressed serious concern over the increased cost for foreign tourists, who have now started arriving in Nepal following the control of the coronavirus pandemic that had brought the tourism sector to a grinding halt for more than two years since 2020. Ramesh Thapa, chairman of NATTA, fears that there was strong possibility that many tourists might consider flying from Indian airports located close to the Nepal-India border, where airfares are comparatively cheaper. If no revision is made, the prices of air tickets to be sold by Nepali travel agencies will become expensive, while online air tickets to be sold by foreign agents would become more affordable. Such a situation would lead to a significant surge in air ticket purchases from abroad, job losses within the local agencies and reduced government revenue.
Despite calls for a review of the taxes imposed on several areas, the Finance Minister Mahat has already said it was impossible to reverse them. A similar request made earlier by financial institutions over the government decision to impose the retrospective taxation system on the merger or acquisition of financial institutions was also turned down by the finance minister. NATTA has also urged the government to form an expert group comprising relevant stakeholders to thoroughly study and analyse the potential consequences associated with implementing a comprehensive tax on all air tickets. The NATTA has also expressed reservation about the absence of provision for date changes or ticket refunds, and unclear process of refunding collected VAT and other taxes collected by the government.
Instead of imposing the VAT and five percent tax, NATTA has advised the government to follow the Sri Lanka and India model, both of which impose an airport service fee and tourism service fee as part of the tax. Tourism is one of the major sectors of foreign currency earnings and employment within the country. Once a foreign tourist arrives in Nepal, s/he stays in hotels or lodges where s/he pays a VAT bill for the food they eat. The 13 percent VAT on international air tickets and additional five percent tax as commission is akin to double taxation, which is unfair. In order to attract more foreign tourists in the country, it would be better if the finance minister agreed to review the taxation on international air tickets. But given his adamant position on revisiting the taxes imposed on so many areas, such as the VAT on the sale of potatoes and onions, it is unlikely that Mahat would heed NATTA's request. But what is sure is that arrival of foreign tourists may drop significantly due to the imposition of the VAT and other taxes on international air tickets.
Scholarship quota
There are anomalies galore in Kathmandu Metropolitan City (KMC), and its mayor has been trying to fix them ever since he took up the position a year back. This, of course, has not been easy, and he's faced opposition at every step - while evicting footpath vendors or bulldozing houses built illegally on public land or dumping garbage at the landfill site at Bancharedanda. He is now trying to ensure that all private schools in KMC provide scholarships to underprivileged or deserving students as required by law. School education upto high school is now the responsibility of the local levels under the new federal constitution of the country.
There are 504 private schools in KMC. However, 39 of them have not given information about the scholarship quota they have been providing to the needy children. According to the KMC, around 13,000 children benefit from the scholarship quota provided by the different private schools. Schools cannot operate purely as commercial ventures and must also fulfil their corporate social responsibility. The least they can do is provide scholarships to needy students in a bid to create an egalitarian and a more just society. Schools failing to do so must be punished.
A version of this article appears in the print on June 23, 2023, of The Himalayan Times.
