Anil Kumar Sinha:

On January 14, the finance minister briefed the country on the promulgation of the new Finance Ordinance for the rest of the current financial year. It came into effect and was effective in writing off an iniquity that had harmful implications and had been in effect for the last three years.

In the eyes of Nepali Tax Laws, what was common between the legendry golfer Tiger Woods if he won a tournament in Nepal and a gambler who won a jackpot in a casino? The law treated both of them equally. In the previous finance ordinance it had been stated that the prize money won by a world-renowned player in any sport would be equally treated alongside the gambler who struck the jackpot. Incomes of both were treated as “incomes from a sudden event.”

The previous finance ordinance regarded the prize money as if it was a sudden gain, sheer luck, without any effort. It is less convincing that the efforts of renowned players like the one who visited Gokarna Golf Club recently should be compared with the income of a gambler where the only effort and skill required is luck. Both incomes attracted a tax of 25 per cent on gross. Was this tax originally envisaged in the prevailing Tax Laws? No. After a great deal of effort and investment from donor organisations, the new Income Tax Act 2002 came into effect from April 1, 2002. Even though it started on April Fool’s day, no one thought through all the foolish implications. The Act only included three aspects as the sources of income — the income from remuneration, business and investment. The prize money or the luck of the gambler did not fit in any of the three categories. As an afterthought, someone introduced a new source called “sudden income” not by the Income Tax Act but by the finance ordinance.

Nepal is in need of new investments and has high potential and opportunity to introduce sports tourism and invite sports lovers of all kinds. This provision is one of the worst disincentives. In the present context, the participation of a renowned player in a tournament in Nepal is more our need than in the interest of the player. Why should such players come to Nepal inviting a lot of their competitors and fans if the government wants a cut in their prize money? It was the right time to have second thoughts about seeing that sports sponsors are not burdened with additional financial liability because they invest so much to promote sports tourism. It certainly is in the interest of the country to provide incentives not tax burdens to the people who have potential to invite people from abroad to watch their games.

Thankfully, the finance minister changed the status between the achievement of a gambler who simply “lucks out’’ and an international player who comes to play and win in a tournament of international repute. What was needed during the past was a small change in the finance ordinance that said that the tax on windfall income would be applicable to effortless windfalls. And allow those people who achieve fame, highlight Nepal and take back good memories with their efforts, to enjoy the prize money without hassles and free of tax. The new promulgation allows this and waives the tax on national and international awards in the field of literature, art, culture, sports and journalism.