BBC Discussion on Revenue Collection & Tax Avoidance

BBC Nepali Service's Mr. Sanjay Dhakal moderates a discussion on revenue collection and tax avoidance in Nepal with Mr. Krishna Hari Baskota (Ministry of Finance), Mr. Pradip Man Vaidya (FNCCI) and Mr. Komal Prokash Ghimire (Tax Specialist) on December 11, 2010.

Revenue target likely

Revenue target likely
TKP, 19-Jun-10

The government is most likely to meet the revenue collection target this year. However, it may face tough challenges ahead in meeting the revised target of an additional Rs. 13 billion in the mid-term review of the budget.

The target set by the budget is Rs. 176.50 billion and the revised target is Rs.189.60 billion. The government aims to pay re-adjusted salary to government employees with the surplus revenue collection.

The revenue collection over the first 11 months of the current fiscal year was Rs. 153.59 billion, which is a surplus of Rs. 2.76 billion against the target of Rs. 150.83 billion until mid-June. The same has grown by 27 percent against the revenue collection during the same period last year. The government had collected Rs. 121.23 billion in the first 11 months last year. “We will definitely exceed the target set by the budget,” said Krishna Hari Baskota, revenue secretary at the Ministry of Finance (MoF).

He, however, added that he was not sure whether the revised target would be met, but he said the collection would reach somewhere near the revised target.

The government’s biggest success has been mobilsing the excise duty. The annual target of Rs. 19.64 billion has already exceeded in 11 months with a collection of Rs. 20.85 billion. Value added Tax was collected at Rs. 47.84 billion against the annual target of Rs. 51.56 billion. The revenue from customs duty was Rs. 31.26 billion in the 11 months against the annual target of Rs. 33.13 billion. “We will exceed the target in all these three areas,” said Baskota.

However, the collection of income tax has been relatively low with just Rs. 26.24 billion until mid-June against the annual target of Rs. 36.42 billion. “The income tax target will be met easily as 40 percent of this tax is collected in July,” said Baskota. The government will struggle to meet the target in the non-tax sector. It has collected Rs. 20.54 billion in 11 months against the annual target of Rs. 26.26 billion.

According to Baskota, the failure of public enterprises to pay revenue to the government as a result of their “precarious situation” resulted in the low collection of revenue through non-tax measures. Non-tax sectors include royalties, sales of government properties and dividends.

The government has collected Rs. 4.73 billion until mid-June as registration fees against the annual target of Rs.6 billion. It means the government will have to struggle to collect the targeted amount, according to the revenue secretary.

Meeting the vehicle tax target will also be tough as the government has failed to distribute smart licence cards and introduce computerised vehicle registration system. The government has collected Rs. 2.13 billion until mid-June against the annual target of Rs.3.50 billion in vehicle tax.

Self disclosures touch Rs 3.45b

MyRepublica.com, 10-Feb-09
Milan Mani Sharma

KATHMANDU, Feb 10: Inland Revenue Department (IRD) on Tuesday collected revenue worth Rs 205 million under the Voluntary Disclosure of Income Scheme (VDIS), as people who had not paid taxes earlier for their property rushed to legalize their property on the second last day of the scheme.

On the day, some 500 persons disclosed their property worth Rs 2.05 billion, said Kapil Dev Ghimire, director general of IRD. “That raised our collections to Rs 345 million under VDIS,” he told myrepublica.com.

Following Tuesday’s disclosure, the volume of property disclosed has soared to Rs 3.45 billion. It generated Rs 345 million in revenue to the government. The highest single disclosure recorded on the day was Rs 1 billion, Ghimire told myrepublica.com.

“Collections grew by more than 150 percent on Tuesday compared to Monday. As more people are flocking in to disclose their property, we are hopeful about collecting about Rs 1 billion in revenue through VDIS,” said Ghimire.

So far, about 750 people have legalized their property under the scheme.

Moreover, in a bid to meet the VDIS’ revenue target of Rs 1 billion, IRD continued to send SMS, make phone calls and send reminder emails and letters potential taxpayers.

Ghimire hopes that a large number of taxpayers will turn up on Wednesday -- the last day of the scheme -- to benefit from the scheme.

The government announced VDIS in this year’s budget in October, 2008 giving opportunity to the people, who have amassed property without paying due taxes, to pay taxes and legalize their property.

It has even promised it will not seek the sources of the income thus disclosed in a bid to lure people to come into the tax net. But to the people who refuse to take benefit of the scheme, the government has warned of tougher actions like confiscation of property and fine and penalty up to 100 percent.

Meanwhile, the business community resisting the scheme has demanded the government to extend the deadline of the scheme, which expires on February 11, 2009.

Organising a press meet in the evening, six business organizations, including Federation of Nepalese Chambers of Commerce and Industry (FNCCI), Confederation of Nepalese Industries, Nepal Chamber of Commerce (NCC) and Nepal Bankers Association demanded the government not to seek sources of initial investment, as entrepreneurs have been paying taxes for their existing property.

"The government must clear the list of the people who should disclose their property under the scheme, and extend the deadline to enable them comply with it," said Kush Kumar Joshi, FNCCI president. NCC president Surendra Bir Malakar even announced of launching a street protest if the government did not extend the scheme.

However, IRD chief Ghimire said that the scheme would not be extended. "We have clarified the business community´s confusions now and again. There is no need to extend its (VDIS) deadline," he told myrepublica.com.

Revenue mobilisation augments by 33.1%

Revenue mobilisation augments by 33.1%
Nepalnews, 3-Feb-09

During the first five months of the current fiscal year, revenue mobilisation grew by 33.1 percent to Rs 43.1 billion compared to an increase of 21 percent in the same period last year, according to a report on the latest micro-economic situation of the country released by Nepal Rastra Bank (NRB) on Monday.

The revenue growth is ascribed to high growth of income tax, VAT revenue, excise, vehicle tax and registration fee as well as high growth in non-tax revenue.

According to NRB, the country’s exports also registered a growth of 30.9 percent during the period against a decline of 4.4 percent during the same period last year.

Overall balance of payment (BoP) saw a surplus of Rs 22.8 billion compared to a surplus of Rs 31.1 million the last fiscal year. Similarly, remittance grew by 65.8 percent in the first five months against a growth of 17.6 percent in the same period last year.
On the other hand, imports also soared by 32.6 percent this year against an increase of 8.2 percent last year. “During the first five months of this year, the government spending increased by 2.5 percent to Rs 48.5 billion compared to an increase of 44.3 percent in the same period last fiscal year,” the report said.

However, the government was absolutely unable to control price rise which stood at 14.1 percent in mid-December 2008 from 5.7 percent in the same period last year.

Revenue collection up by 15.4 pc

Revenue collection up by 15.4 pc
eKantipur.com, 1-Oct-2007

The government's revenue collection maintained its growth trajectory and rose by 15.4 percent in the first two months of the current fiscal year, compared to the same period last year.

According to the Ministry of Finance (MoF), the government collected revenue amounting to Rs 12.41 billion during the period. The collection stands at about 12 percent of the target the government set for the year. The government is targeting to raise Rs 103.66 billion in revenue during the 2007/08 fiscal year.

An official at the MoF said that growing consumption and consequent rise in imports had pushed up the collection. "With the 11-year conflict ending, some sectors of the economy, like tourism, have begun to revive," he said. "However, the collection is still not encouraging because the situations of the industrial and export sectors have not improved yet."

He stated that frequent strikes, protests, and highway closures had hampered the government's efforts to tap the revenue potentiality. "Many industries have remained closed, while operations of others have remained disturbed at different intervals due to trade unions' protests," he said, elaborating on the reason behind the less than required volume of collection.

The government's total expenditure during the period amounted to Rs 8.87 billion, which is a rise of 10.6 percent compared to same period last year. Around Rs 891.8 million was spent under capital expenditure, which covers investment in development projects. This indicates that development activities have moved on at a snail's pace. The budget for the current fiscal year has allocated over Rs 55 billion under capital expenditure.

Normally, the development expenditure remains negligible in the initial months of the fiscal year, said officials. They, however, added the development process is reeling under the structural inflexibility in the spending system, poor absorptive capacity and multilayer as well as complicated decision-making channels. They expressed hope that the pace of spending will speed up after the first half of the fiscal year.

Of the allocated Rs 98 billion for regular expenditures, the government utilized Rs 7.54 billion during the period, says a MoF press release. Likewise, the government paid back Rs 439.8 million of debt stock.

The total spending recorded during the period was 58 percent of the total fund released. The central bank had released Rs 15.23 billion for the total spending during the period, which included Rs 12.93 billion as regular expenditure, Rs 1.69 billion as capital expenditure and Rs 599 million for repaying debts.

Revenue collection more than targeted: Govt

Revenue collection more than targeted: Govt
Nepalnews.com, 4-Aug-2007

Despite nominal economic growth, terai unrest as well as various political ups and downs, the government's revenue collection last fiscal year was more than it had targeted.

According to Ministry of Finance, last year Rs 87.19 billion had been collected as revenue by the government, a healthy 20.64 percent increase compared to what was a year before that during which time revenue growth rate was disappointing.

The government had set itself a target of collecting around Rs 86 billion in revenues last year. If the revenue maintains this steady growth rate then in the current year also the revenue collection would be more than targeted. This year the government has set itself a target of collecting Rs 103 billion.

In the latter period of last year, the terai unrest was at its peak, owing to which there had also been disruption in revenue collection for a few days. But notwithstanding this the revenue collection was more than targeted.

Revenue collection shoots up

Revenue collection shoots up
eKantipur.com, 25-Jun-07

Revenue collection increased by an impressive 20.77 percent in the first 11 months of the current fiscal year, even though the economy is yet to see a convincing revival.

The data released by Ministry of Finance shows that the government collected revenue amounting to Rs 71.28 billion during the period. During the period, the government spent around 61 billion rupees under the recurrent expenditures. It has earmarked around 83 billion rupees under the recurrent expenditure for the current fiscal year.

The government's development budget, however, has been progressing at a snail's pace. The government expended only Rs 20.62 billion under the capital expenditure. The government has appropriated Rs 44.97 billion under capital expenditure for this fiscal year.

On the repayment of loans, the government paid off Rs 14.37 billion as principal debt of both foreign and domestic loans during the period.

Over the period, over Rs 105 billion was released from the government's coffer, a steady 22.8 percent rise, as compared to the amount release in the same period last year. Of the total, Rs 67 billion was released under the recurrent expenditure and Rs 23 billion under the capital expenditure.

Biratnagar customs take improves

Biratnagar customs take improves
eKantipur.com, 21-Jun-2007

Revenue collection of Biratnagar customs office has improved significantly after revenue flying squad intensified patrol, sudden raids and site inspections, bringing down incidence of revenue leakage.

The customs office said it is presently collecting revenue worth Rs 1 million a day, whereas its daily collection used stand barely at Rs 150,000 till May end.

Revenue Investigation Department had mobilized a special flying squad to control smuggling and revenue leakage after Customs Department disclosed that Biratnagar customs office was missing monthly collection target by Rs 150 million due to rise in illicit trade.

The customs office has reported that the revenue collection grew simply because sudden raids and site inspections by the squad have resulted in a dramatic decline in cross-border smuggling.

Owing to the rise in revenue collection, the customs office has said it has achieved the annual collection target within the 11 months of the fiscal year.

Trade deficit continuous to widen: NRB

Trade deficit continuous to widen: NRB
Nepalbiznews.com, 11-Jun-2007

Due to continuous rise in imports against export, Nepal's trade deficit continues to widen, as it crossed Rs 70 billion during the first nine months of the current fiscal year 2006-07, states a recent data of Nepal Rastra Bank (NRB).

According to the macroeconomic situation report released by NRB on Sunday, total exports fell by 2.9 per cent in the first nine months, while imports registered a growth of 7.4 per cent. Total exports in the corresponding period in the previous year had risen by 9.1 per cent and a 21 per cent rise was recorded on imports.

While exports to India declined by 2.3 per cent in 2006-07 as against a significant increase of 15.4 per cent in the same period of 2005-06, exports to other countries fell by 4.2 per cent in comparison to a decline of 2.6 per cent in the preceding year.

The responsible factors for the dismal performance of the export sector included the unfriendly investment climate, worsening security situation, load shedding and the Terai bandh, among others.

The decline in exports to India was ascribed to the decline in exports of polyester yarn, cattle-feed, plastic utensils, G.I. pipes and readymade garments. Likewise, the decline in exports to other countries was due to the decline in the export of readymade garments, pashmina, woollen carpets, and handicrafts and tanned skin.

On the other hand, total imports from India increased by 9.5 per cent in the review period compared to a higher growth of 26.4 per cent in the corresponding period last year. Similarly, imports from other countries registered a rise of four per cent compared to a growth of 13.4 per cent a year earlier.

The rise in total imports during the period was attributed to the rise in imports of vehicles and spare parts, petroleum products, cold rolled sheet in coil, electrical equipment and cement, among others, from India as well as a rise in imports of crude palm oil, computer parts, chemical fertilizer, zinc ingot and medicine, among others, from other countries.

On the external front, the overall balance of payments (BoP) posted a surplus of Rs 10.79 billion in the first nine months of 2006-07. In the corresponding period of 2005-06, the BoP surplus was significant at Rs 17.15 billion.

Of this BoP surplus, the current account surplus was Rs 6.85 billion and the remaining Rs 3.94 billion emanated from the capital and financial account.

In the government budgetary operations, the total expenditure, on a cash basis, increased by 13.3 per cent to Rs 68.68 billion. Of the total government expenditure, recurrent expenditure increased by 12.7 per cent to Rs 47.76 billion, while the capital expenditure rose by 25 per cent to Rs 11.67 billion.

Increase in the allowance of government employees, expenses on the management of Maoist's army, re-establishment of the police posts accounted for the acceleration of recurrent expenditure in the review period, while a frequent Terai unrest and absence of elected representatives in local bodies accounted for deceleration in capital expenditure.

During the review period, total revenue grew by 22.2 per cent to Rs 56.65 billion compared to a growth of a mere 0.1 per cent in the previous year. Revenue collection grew on the account of adjustment in customs and excise rates, improvement in customs valuation, increased tax compliance, a rise in corporate income tax and value added tax as well as an increase in some non-tax revenue.

In the review period, the government incurred a cash budget surplus of Rs 2.50 billion in contrast to a deficit of Rs 5.99 billion in the corresponding period last year. In the review period, the government mobilised Rs 12.41 billion through borrowing, consisting domestic borrowing of Rs 10.03 billion and external borrowing of Rs 2.38 billion.

As capital expenditure did not increase as expected, the government recorded a cash reserve of Rs 16.78 billion with the NRB in the review period.

As a result of higher cash surplus with the NRB and domestic debt repayment of Rs. 3.03 billion, the net domestic financing of the government budget stood at a negative of Rs 9.78 billion in the review period.

Inland Revenue Office (IRO) to miss revenue target

IRO to miss revenue target
eKantipur.com, 9-Jun-2007
BY BINOD BHANDARI

BIRATNAGAR, June 9 - Two-and-half months of terai unrest during January to mid-March and frequent general and transportation strikes of recent days have badly hit operation of businesses and collection of revenue at Inland Revenue Office (IRO) in Biratnagar. As a result, the office is set to miss its revenue target set for the year, IRO officials told the Post.

"If the present trend of collection continued, revenue collection at the office will fall short by Rs 200 million," said Laxman Basnet, chief of Biratnagar IRO.

The government has set target at Rs 1.22 billion for the IRO for this fiscal year. The amount includes target for income tax, VAT, excise duty, tax on interest and vehicle tax. However, due to the terai unrest and bandas, the office has collected only Rs 809 million as of mid-May (10th month) of the fiscal year.

"We have to collect Rs 420 million in order to achieve our target,” said Basnet, adding that until and unless the situation improved dramatically, that seems very unlikely.

According to the report of the office, markets in Biratnagar and its vicinity have already remained closed for 150 days during the period.