The total revenue of the government has shown an upward trend over the years, including over the past three years. In both absolute and relative terms, revenue collection has shown more or less a rising curve over the years. But that can be misleading unless the growth in revenue is compared with the growth in government spending and the present collection potential is assessed. Recently, the Nepal Rastra Bank brought out statistics that said the government’s spending has shot up sharply vis-à-vis its revenue. Even in the best of times,

Nepal’s internal revenue has been just enough to cover its recurrent expenditure. Most of its capital expenditure has been financed through foreign loans and grants. In the current year, the government’s budget deficit is expected to turn out to be considerably larger than its estimate.

Successive governments have stressed the adoption of ‘concrete’ measures to bring into the tax net more and more people and generate more revenue through improvements in the administrative machinery, apart from juggling various tax rates. Government leaders and top bureaucrats may have ready replies to explain the gap between the growth in revenue collection and in expenses, or the failure to exploit the collection prospects significantly. The government may have much to improve on the spending side of the equation, but the general public and experts appear to think that this is due to the large shadow economy that is outside the tax net and that the alliance between politicians, bureaucrats and businessmen is just too unholy to provide any great hopes of a turnaround in the collection scenario any time soon. The factors that have led to the ‘gold rush’ to the finance ministry postings may explain most of the state of affairs.

The volume of actual imports into Nepal from Khasa through the Tatopani customs point are reported to run to more than Rs.30 billion annually. But customs collections there work out to less than two billion rupees a year. Given that the average rate of import duty that Nepal has in place comes to less than 10 per cent, Tatopani should have logically collected about three billion rupees. Moreover, the Tatopani Customs office is reported to have been grossing a decreasing amount of revenue for the past three years, and the collections during the first five months of the current fiscal year fall Rs.160 million short of the target. Officials have tended to hold minor factors responsible for these problems. They may even blame the lack of tax culture in Nepal, and say that those with a tax liability often invent ways of evading tax, and that change in the attitude of tax officials and taxpayers is overdue. These explanations do not account for the fact that in posting bureaucrats to the finance ministry, their specialised fields of study are often ignored; that is why most finance secretaries, including the present ones, have been non-economists. All this is because extraneous factors have weighed heavier than job requirements in government. Any turn for the better presupposes the end of the state of impunity that exists for financial crime in government and outside.