BUDGET 2011-12: Budget to curb revenue leakage, crackdown on tax evaders planned

KATHMANDU, JUL 16 -

In the new budget, the government has tried to strengthen revenue administration with a string of policy measures to control revenue leakage and punish tax evaders.

Though the government failed to meet the target for the current fiscal year, the budget has set an ambitious revenue target for 2011-12.

For the next fiscal year, the government targets Rs 247 billion in revenue collection. With the collection this year down by Rs 11 billion, the government needs a growth rate of 18 percent to meet the revenue target.

In the wake of cases of tax evasion through fake Value Added Tax (VAT) bills, the budget has revised the legal provisions to take legal action against both the parties found involved in fraudulent activities. “Now, auditors of those firms involved in VAT evasion will also be under the scanner,” a Finance Ministry official said.

In a bid to discourage under-invoicing and make customs valuation realistic, the budget has made an arrangement for declaring the Maximum Retail Price (MRP) of imported goods at customs points. Now, importers will have to declare the MRP of goods identified by the Department of Customs (DoC) at custom points. According to DoC Director General Tanka Mani Sharma, the department will update the valuation every three months.

With plans of import identity card implementation by mid-December of the next fiscal year, the budget aims to control illegal and unfair trade.

However, the proposal of voluntary asset declaration and drafting of a Property Tax Act kills the spirit of reforms on revenue administration. “Arrangements in Property Tax Act will be made whereby an individual, family or company can make voluntary disclosure of all the fixed and movable properties to the Inland Revenue Offices of the Government of Nepal after paying a certain percentage of tax,” the budget says.

This voluntary disclosure will be treated as the tax base, effective from the Fiscal Year 2012-13. However, this provision that seeks to address the private sector’s demand for property disclosure will make illicit properties legal.

Amid complaints that the Armed Police Force (APF) deployed for revenue control measures is not effective enough, the budget proposes mobilisation of the APF under the direction of the Customs Department and the Revenue Investigation Department. This step was taken on the basis of request from these two departments, according to Finance Ministry sources.

The budget has given the automobile and real estate sectors a reason to smile as it reduces capital gain tax on the income from the sale of houses and land by 50 percent. With the budget also reducing the capital gain tax on share transactions, the capital market is expected to get a much needed boost. As per the budget, such tax has been reduced from 15 percent to 10 percent in the case of entities and from 10 percent to 5 percent in the case of individuals.

With the budget maintaining the earlier tax rate for vehicles, the automobile sector hopes to see a growth in 2011-12. The tax rate was unchanged as import of two-wheelers and four-wheelers slumped due to changes in the excise duty and registration charge.

Continuing the past trend, the budget increases excise rates on alcohol, beer, cigarettes and tobacco products. Giving relief to Nepalis returning from foreign employment, the budget reduces the prevailing flat rate customs duty on LCD, Plasma or LED TV brought by them.

The budget has also given something to hydropower developers. It has fully exempted income tax for the first 10 years for hydropower projects commencing their construction within August 24, 2014 and starting commercial production by mid-April 2018. “Thereafter, 50 percent income tax exemption for the next five years will be provided,” the budget states.

To promote mergers among banks and financial institutions, the budget proposes extending the deadline to submit the intention of merger by mid-November 2012, apart from waiving land registration fee to the merged entity.

Posted on: 2011-07-16 09:49
SANJEEV GIRI, BIBEK SUBEDI, http://www.ekantipur.com/2011/07/16/business/budget-2011-12-budget-to-curb-revenue-leakage--crackdown-on-tax-evaders-planned/337472.html