Govt proposes income source info for property buys

Govt proposes income source info for property buys
ekantipur, 5-Nov-08
PRABHAKAR GHIMIRE

If the Cabinet approves what Finance Minister Dr. Baburam Bhattarai proposed Wednesday, people buying land and buildings worth Rs. 5 million or more will soon have to disclose their income sources.

Those spending Rs. 2.5 million or more to own a house and Rs. 1.5 million or more on a vehicle purchase will also need to disclose their income sources.

The spending ceiling, consumption beyond which will have to go through the government's income screening, will come into effect as soon as the Cabinet endorses the proposal, said Dr. Bhattarai, unveiling the proposal for the first time Wednesday.

He had incorporated a policy of screening people's incomes while procuring expensive land, houses and vehicles in the budget for the current fiscal year. The policy had drawn criticism from the business community.

Dr. Bhattarai, however, defended it as a move to discourage tax evasion and to maintain transparency in property dealings. "Our aim is to establish fairness in the operation of the property market and check tax evasion," he told the press.

The finance minister further disclosed that the Ministry of Finance (MoF) has already prepared guidelines for regulating transactions in property.

He further said that MoF has drafted a manual to give legal identity to the Voluntary Disclosure of Income Scheme (VDIS) -- a programme announced in the budget for the current fiscal year -- in order to encourage tax payers to declare their income sources on their own.

A separate legal provision on VDIS is being formulated on the back of bad experience of a few years back when the Commission for Investigation of Abuse of Authority (CIAA) -- the government's anti-graft body -- refused to recognise incomes that taxpayers disclosed.

Under the scheme, the government had collected about Rs 1 billion in revenue, which was 10 percent of the total property that taxpayers disclosed voluntarily.

''Taxpayers’ voluntary declaration of income will not face any hassle now. We are formulating a law to give them recognition,'' Dr. Bhattarai stated. ''I also assure you that no action will be taken against taxpayers who declare their incomes voluntarily,'' he added.

Responding to experts' scepticism about the government is ability to mobilize the targeted volume of revenue, Dr. Bhattarai said that revenue collection has shot up by 24.3 percent to Rs. 26.24 billion during the first three and half months of the current fiscal year. The government has set a revenue target of Rs. 141 billion in 2008/09.

The ministry has also prepared a manual for implementing budgetary programmes like waiver of loans and interests on loans as announced in the budget.