 |
Kathmandu,Monday May 29, 2000 Jestha 16, 2057.
|
Budget to announce tax
initiatives
By Ameet Dhakal
KATHMANDU, May 28 - The budget due to be proposed
in the parliament on Tuesday will bring drastic changes in the area of taxation through
new tax initiatives.
It will impose income tax in a number of new areas
with an aim to taxing effectively all types of income and make necessary provisions to
enforce Value Added Tax (VAT) up to the retail level, says a highly placed government
source.
Finance Minister Mahesh Acharya is imposing these
changes to meet the bloated expenditure that is likely to cross over 92 billion rupees due
to the hike in civil servants pay and additional expenses for the security arrangements.
Under the new tax initiatives, the budget will
impose tax on- export earning, dividend, pension, foreign earnings, capital gains and
import of raw material. Similarly, the budget will bring cooperatives running banking
activities, political parties and Schools and Non Governmental Organizations, and profit-
making activities under the tax net.
Though the income tax rate in these areas remains
to be finalized, the budget is likely to announce 5 percent income tax on export earning
to start with and upgrade it gradually to 25 percent in the next 5 years.
To bring these new areas into the income tax net,
the government has already drafted a new Income Tax Act and will propose it for
ratification in the ongoing parliamentary session. However, Finance Minister Mahesh
Acharya will make majority of these taxes effective immediately after the budget through
Financial Act.
mong the above mentioned areas, capital gain is
unlikely to be taxed by the budget since it requires amendments in a number of existing
laws.The budget is going to be particularly painful to the businessmen involved in the
Trans-Himalayan trade. The budget will mandatorily channel the Trans-Himalayan trade
through banking system.
There will be, however, some good news for the
businessmen to cheer up in the budget. The budget will remove the surcharge imposed in the
import and scrap the provision of Tax Discount at Source (TDS) and it will reduce the
customs slab of 40 percent on some durable goods to 30 percent.
Similarly, the budget will announce some
adjustments in income tax, under which businessmen will not have to pay income tax higher
than certain percent of their last years tax amount. This provision is aimed at soothing
businessmen’s fear that their income tax liability might increase many-folds with the
enforcement of VAT.
Enforcement of Customs Act will be the major
instrument used by the budget to optimize VAT collection and its extension up to the
retail level. Customs Act provides legal authority to the government to buy imported goods
from the businessmen offering price higher than the invoice value if it thinks that the
goods have been heavily underinvoiced.
Underinvoicing has remained as the major problem in
the enforcement of VAT up to the retail level. Experts say once the practice of
underenvoicing is checked at the customs, it will be self-policing for the businessmen to
evade tax at the retail level. However, contrary to the expectation, the budget will not
reduce the VAT threshold to zero level. "Rather it is likely to remain
unchanged," said the official.
The government hopes to mobilize about 5 billion
rupees in revenue through these initiatives. Banking upon these new initiatives and
additional inertia, the budget is likely to make an ambitious projection of revenue. The
revenue projection will be in the range of 50-52 billion rupees, said the source. The
estimation will be ambitious indeed especially in the backdrop of huge revenue shortfall
in the current fiscal year ending mid-July. The actual revenue realization in the current
fiscal year is likely to be 41.5 billion rupees, leaving a shortfall of about 3 billion
rupees.
Other Stories
|
