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Historical achievement
AUG 05 -
For the last four years in a row, the government has succeeded in mobilising revenue in excess of the target. In the fiscal year 2006/07, the government took in Rs. 87.71 billion against the target of Rs. 85.37 billion, or 102.74 percent. In 2007/08, the collection reached 103.26 percent compared to the projected Rs. 103.67 billion. In 2008/09, revenue collection amounted to 101.23 percent of the target. In 2009/10, the revenue administration was able to collect Rs. 179.95 billion against the target of Rs. 176.5 billion, or 101.95 percent. Similarly, the revenue/GDP ratio increased significantly. The revenue/GDP ratio in 2006/07, 2007/08, 2008/09 and 2009/10 reached 12.05 percent, 13.15 percent, 14.7 percent and 15.2 percent respectively. In this context, and in the context that increased revenue collection over the years clearly indicates that there are potentialities, the government of Nepal remains committed to increasing this ratio to 20 percent in the years ahead.
What then makes us optimistic about mobilising increased revenue? First, it is our continued commitment and dedication. Second, reform measures and policies. And, finally, the programmes and activities we implement. Within this framework, six revenue programmes and activities were adopted in 2009/10, namely (i) Broadening the tax net, (ii) Improving social security and ethics, (iii) Reducing transaction costs, (iv) Increasing tax concessions and rebates, and (v) Strengthening and reforming the revenue administration.
In an effort to broaden the tax base and expand the net, Permanent Account Numbers (PAN) were distributed to all those who had a regular income. In 2009/10, more than 105,000 regular income earners were issued PANs. Programmes like this contributed to a total income tax collection of Rs. 33.83 billion representing a growth of 23 percent compared to the previous fiscal year. Rs. 300 million was collected as capital gains tax from the transfer and sale of land with a transaction value exceeding Rs. 5 million. In addition, Rs. 5.5 billion was collected in land ownership transfer registration fees.
Imposition of value added tax (VAT) on apartments with a transaction value exceeding Rs. 5 million also helped to broaden its coverage. Some 200 volunteers were mobilised to enforce billing at the retail level. With additional measures and continued efforts of the revenue administration, VAT collection reached Rs. 53.46 billion, representing an increase of 35 percent over the previous fiscal year.
In fiscal 2009/10, the government began imposing a tax of 1 percent on the salaries of public and private sector employees. As this tax was aimed at expanding social security, a three-member committee consisting of representatives of the government, the private sector and trade unions and headed by the revenue secretary of the Ministry of Finance was also formed to manage it. The committee has already submitted its interim report to the Ministry of Finance. The report has recommended providing a monthly unemployment allowance to those with no jobs or have been laid off, life insurance, maternity facilities and compensation for workplace-related accidents, among others. All these recommendations are expected to be included in the upcoming full-fledged annual programme and budget of the government within the current fiscal year 2010/11.
Recognising the instrumental role of the private sector in socio-economic development, the government has introduced policies like exemption of excise duty for using domestic scrap, lump sum refund of VAT within 30 days and exemption of VAT on the import of machinery, equipment and spare parts for use by hydropower developers. An income tax rebate for a period of 10 years has also been provided to hydropower developers. Moreover, industries employing more than 1,200 people with 33 percent of the workforce consisting of women, Dalits and handicapped are provided a 20 percent rebate on income tax. Moreover, broker and selectivity modules have been introduced to facilitate foreign trade. Under these modules, importers can submit their customs declaration forms electronically and only a very few consignments are subject to a full physical verification.
The government has also abolished local development tax and reduced agriculture service tax by 3 percent. All 40 percent customs duties have been reduced to 30 percent. These reform measures helped to increase customs collection to Rs. 35.03 billion (plus 32 percent). The government also succeeded in collecting about Rs. 20 billion through its efforts to reform revenue administration and control leakage. In fiscal 2009/10, the government took in Rs. 24.31 billion in excise duty (up 50 percent). Likewise, revenue collection from vehicle tax stood at Rs. 2.53 billion while non-tax revenue amounted to Rs. 25.28 billion.
The government is committed to continuing its agenda of strengthening revenue administration; and in this regard, it will be establishing 13 tax service centres in the Kathmandu Valley and an equal number elsewhere in the country. The recently approved organisation and management (O&M) report aiming at making customs administration more efficient will be implemented. A separate Post Clearance Audit Office within the custom administration has been established, and the Inland Revenue Department has operationalised its call centres to allow taxpayers to lodge complains, make inquiries and submit their tax returns. All 23 Inland Revenue Offices have been connected to the Inland Revenue Department by wide area network. Likewise, the Department of Revenue Investigation continues to operate 24/7 with its control room. A flying squad remains on standby at the department and its check posts scattered across the country.
With good policies and efforts, the government’s revenue administration has been able to continuously surpass its revenue collection goals. With more dedication and commitment, it will be able to mobilise and collect more revenue in the days to come. At the same time, it will continue to strive toward building and creating a positive image in society.
(The author is revenue secretary, Ministry of Finance)
Posted on: 2010-08-06 08:55
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