Fulfil promises

The campaign of the All Nepal National Free Students’ Union (ANNFSU-Revolutionary) - a student wing of the underground Communist Party of Nepal (Maoist) to bring the government’s education policy back on to the right track, has plunged public schools into chaos and confusion. Due to mounting pressure from ANNFSU, mainly in the form of threats
and manhandling, virtually all public schools in Kathmandu Valley have remained closed. If the situation turns more grave, the closure could be extended further.

The student wing of the Maoist insurgents have been exerting pressure on all public schools across the country for a long while, demanding waiver of fees, exclusion of Sanskrit education from the curriculum and a ban on the practice of singing the national anthem. Though these were sporadic incidents of low-key struggle between the school management and the revolutionary group, hostility has boiled over recently. News reports tell stories of this students’ group and the Maoists manhandling teachers in an attempt to coerce them into accepting their demands. The situation has reached such a pass that teachers, who are living a veritable nightmare, are desperately calling for security and shutting down the public schools indefinitely. Caught in this mess and uncertainty are students who belong to the lower classes. The closure of public schools, for whatever reasons, have played havoc with students’ lives. In a country where an overwhelming majority of population live in abysmal poverty, irregular classes due to strikes and protests, the fragile education sector could be weakened further.

Chances are rife that the insurgents may cash in on the issue to unleash violence in the Valley. Contrary to the government’s policy of providing "totally" free education up to class ten, all public schools are charging extra fees under various heads. This has undoubtedly hit the lower income groups hard. This practice clearly demonstrates the government’s inconsistency in fulfilling its officially declared promises. Moreover, it has cheated the public by flouting regulations. It is, in fact, ridiculous, on the part of the government to deviate from its education policy. In principle, it preaches free education, but in practice the so-called "free" education is becoming increasingly very costly.

Does the government have to wait for a lot of furore, just like in the case of kerosene price hike, before fulfilling its promises? Or, has it grown fond of the opposition’s hammer and tongs? This time the students, teachers and parents cannot afford to be the mere spectators of the government’s indifference and fickle attitude. The much-hyped cost-free education has been a handy weapon to gain cheap popularity and bamboozle the public. If the government is incapable of implementing this education policy, then why did it draft it in the first place?

The grievances of the Ministry of Education may be plenty. But it does not mean that it has the freedom to formulate and revise policies arbitrarily, especially in vital sectors such as education and health. Providing free of cost education alone is not the end of its responsibility. In order to produce a competent workforce and raise the country’s economy, the government should bring about drastic changes to address a series of woes which plague all levels of the education system. Since small beginnings have great endings, it is wise and practical to start the reform campaign from schools, the bedrock of education. The government must, therefore, provide the necessary infrastructure and qualified teachers, along with feasible measures to combat corruption and malpractices in the education sector. More importantly, the government should find a way out of the mess in which public schools are currently embroiled.

Introduction of capital gains tax

By Rup Khadka

International tax glossary defines capital gains as gains realised from disposal of capital assets by a taxpayer. Capital gain is the difference between the purchase price and the selling price of the asset. There are various practices around the world regarding the taxation of capital gains.

Capital gains accrue whenever the value of capital asset appreciates, and such gains are realised whenever assets are disposed in cash or kind. Capital gains can be taxed in the year they accrue or in the year they are realised. Under the accrual system, tax is levied on a periodic basis as they accrue, irrespective of whether or not they are realised in the tax period. On the other hand, under the realisation basis, tax is levied on gains in the year when they are realised, which are accrued over a period of many years.

Pros and cons: Theoretically, capital gains should be treated as other regular income and be added to the total income and be taxed with regular tax rates. This means that capital gains should be taxed in the year they are accrued with ordinary rates. Such capital gains are treated like other sources of income. Such a system maintains both vertical and horizontal equity. Unlike under the realisation basis, it also does not create lock-in effect and bunching problem.

However, it is difficult to implement such a system since it would be necessary to estimate the market value of all taxable assets each year. Further, since taxpayers are required to pay tax on income that has not yet been realised, it may be difficult to pay tax for something that does not bring in regular income. They may be forced to sell liquid assets to pay tax.

That is why, in practice, capital gains are taxed on a realisation basis, ie, tax is levied on gains when a taxpayer sells his assets and realises the gains. However, under the realisation system also problem of valuation may arise in the case of disposition of assets where no consideration is received such as transfer by gifts and bequests.

Further, under the realisation system, investors continue to hold appreciated assets to postpone tax payment. By doing this, taxpayers save interest on tax amount. This, however, hinders the flow of capital to its most profitable uses since taxpayers are encouraged to keep capital out of productive use for more time than otherwise might be. This is known as lock-in-effect.

Taxation of capital gains on the realisation basis also leads to the bunching problem. To go a little further, gains are accrued over a period of time during which the asset is held. Such gains are bunched in the year when they are realised through the disposal of asset. Since tax is levied in one year, it is subject to higher rate under a progressive rate structure. Gains would have been subject to lower rate, if they were subject to tax in the years when they accrued.

The bunching problem could be reduced through such ways as averaging, lower rate on capital gains, or taxation only on a part of capital gains. But most of these provisions dealing with bunching problem complicate tax system and tax administration. Further, since corporate tax is levied with a single rate, bunching problem does not arise in case of a corporate tax. Furthermore, even in the case of individual income tax, the bunching problem is not that serious now than it used to be in the past due to drastic reduction in both the number and level of tax rates.

Rationale for capital gains: Capital gains taxation is justified on various grounds:

Since a large part of capital gains is obtained by high income groups, capital gains taxation improves both vertical and horizontal equity. It is said that heavier taxation on capital gains will make the system dynamically and statically more progressive.

Capital gains taxation also improves economic efficiency. This is because such a taxation discourages investment in ‘non-productive’ assets such as land, building and antiques. There is no reason for promoting speculative investment for appreciation in value at the expense of investment for steady earnings and dividends. Further capital taxation also saves resources of both taxpayers and tax administration by not encouraging taxpayers to convert other incomes into capital gains and tax officials to prevent them.

It is not easy to distinguish capital gains from other types of income. Any division is arbitrary. If capital gains are exempt, taxpayers often try to classify other kinds of income as capital gains. Any attempts to restrict the conversion of other income into capital gains would make the tax law and administration unnecessarily complex. For example, it becomes necessary to introduce several restrictions on the deductions of expenses and losses. To avoid this, it is necessary to bring capital gains into the tax net.

While capital gains itself may not provide a large tax base, its taxation is necessary to prevent the tax base of income tax. This is because exemption of capital gains is a source of avoiding income tax as it makes it possible to classify regular income as capital gains.

Capital gains tax is also desirable to maintain stability in the economy. It plays a counter cyclical role since taxpayers
have to pay more tax when the value of asset appreciates and less when it depreciates.

Different treatment: Despite the above mentioned rationale for taxation of capital gains, there is no consensus among economists and others, regarding the tax treatment of capital gains. Since capital gains are non-recurrent, lumpy income on realization at one time, they are not generally taxed as ordinary income. There are different practices around the world concerning the imposition of tax on capital gains. Some countries include tax capital gains as other types of income, while others levy separate tax on such gains. Most countries, which are levying capital gains tax, impose corporate tax on the capital gains of the corporate taxpayers while there are practices to levy separate capital gains tax on the payers of individual income tax. Some countries include wide range of assets in the tax base while others exclude several types of assets from the tax net on various grounds, including political and administrative. Still, some countries either exempt certain types of capital assets or adopt rollover provision not to hinder the free flow of capital in the most productive uses. The taxation of capital gains has, in fact, been the most difficult area in the field of income taxation.

Once upon a time

By Ritesh Shrestha

With the help of my walking stick, I sluggishly made my way towards my computer and logged onto my religious website -www.kantipurinagari temples.com. Through my one-centimetre thick glass, I started visiting temples of the valley and offered my prayers through the keyboard.

"Grandpa, what kind of movie are you watching? Let me see."

"This ain’t a movie my child."

"Well, who is this new pop star in town then?"

"Child, this is not a pop star but, one of our Hindu gods - Mahankal.

"God? But why is he wearing a jazzy black specs?"

"That’s not specs. Legend tells us that it is the statue of a Tibetan tantrik (witch doctor) who was brought thousands of years ago for the well being of the people by the then King. He was then blind folded and chained, look at the chain around his whole body, so that he couldn’t turn his tail as he passed by. After he was done for, people made this idol and started worshipping it."

"Sounds very queer. Can you please take me to the temple then?"

"Sorry, the temple doesn’t exist anymore."

"Oh really, another fairy tale? Where did it go then, back to Tibet?"

"No, no. You know times have changed. In our time, every idol had a personality that compelled passers-by to bow down. Temples were present at every nook and corner of the valley. They were always young, polished and well nourished attracted millions of devotees from Hindu lands all over. Oh child, you remind me of those lovely days. In Dashain, we used to tour all around the temples of the valley. You wouldn’t believe it; hundreds of people flocked around in the same way. Each and every temple held a different story for their establishment and reason for celebration of different festivals. It’s sad that things don’t happen as it used to. Nowadays, we don’t host such wide varieties of festivals. The thousands of antediluvian temples wrapped up delicate artistic carving that wildly fascinated tourists from all around the globe.

Then, the valley was a spot for generation of huge amounts of dollars. However, as people slowly began to get less attached to God, most of the temples lost the usual respect and maintenance and all we have now are the collapsed remains.

Our Kathmandu valley once hosted seven World Heritage Sites. However, due to the deterioration of the once rich cultural landscape resulting from gross neglect and public negligence, the World Heritage Committee (WHC) downgraded them to the list of "Endangered Heritage Sites" and set a deadline to preserve the sites by providing sufficient money. In the end, WHC removed our heritage sites from the Endangered Heritage Sites list. They were fed up of being asked for more time and money.

"That means we don’t have such monuments which could be counted as national heritage?" "The only ones I guess are the statues of Kings and politicians like BP and GP Koirala, Ganesh Man Singh, KP Bhattarai..."

Will the NC feud affect mainstream politics ?

The Kathmandu Post and Mercantile Communications conducted a survey on the topic: "Does the feud within the Nepali Congress have an adverse impact on the Nepalese body politic?" The survey was done on the Net last week. Of the total 421 respondents, 59.4 percent (250) said "Yes", 34.7 percent (146) said "No" and 5.9 percent (25) said don’t know.

We regret the inconvenience, if any, that may be caused on account of original names being kept back by some respondents.

Feuding is healthy. It keeps the parties alert. Democratic process demands that opposing parties have a debate on the issues. In the past, government business was conducted in secrecy. Now we have democracy, so it is healthy to have an open discussion on issues affecting the nation and the people in general. Don’t you think it is really time to get rid of veteran Girija Koirala along with the other ‘good old boys’. Where is the leader of the NC? Only old leaders have shown high-handedness within the party. Come on, young leaders of the NC speak up and take charge.

- Kiran

It is a well-known fact that stability always leads to development and successful implementation of policies. But instead of getting united and promoting understanding, the government and the people all are busy blaming each other. The NC infighting has only hampered governance and disillusioned the people with democracy. Though a majority party, the NC is incapable of fulfilling its responsibilities. Intra-party feuds will only worsen in future.

- Roshni

There is no democracy within the NC. So how can we expect it to lead the country? Intra-party election is a new concept in the party which was used to handpick leaders by one of the Babus. Habits and traditions die hard. And this seemingly democratic practice has spilled poison in the NC. There is no doubt that intra-party squabbles has had a negative impact on mainstream politics.

- Nepali

Talking about the feud within the NC, the scene is akin to street dogs fighting for the coveted bone. If only NC were truly united with competent, honest, dynamic and above all, democratic leaders, Nepal would have changed for the better in the last ten years. However the situation in our country is sadly different. Ultra-Indian sympathisers have been ruling our country since the reinstallation of democracy. It's high time the Nepalese chose loyal and able leaders. Only then, will our country have some hope for a peaceful and prosperous future.

- Save Nepal

In most countries, there is power struggle inside and outside political parties. Power struggle is not a new phenomenon in politics. Unfortunately, it has been taken as a big issue in Nepal. Whichever newspaper you want to read, the headlines highlight party news, as if there are no other important issues and problems in the country. Party is a system, not the property of a man. So, whoever becomes the President of the party, it shouldn’t affect the country. If it does, it is not a party. In the case of NC, there is just dirty power struggle. Elections are an integral part of democracy. Therefore, intra-party poll is not an alien practice. With the NC Convention round the corner, the excitement and tension that has followed is not a big thing. The issue is, to some degree, a making of irresponsible newspapers.

- Hari

If the feud for power continues within the ruling Nepali Congress Party, it will certainly affect Nepal in all aspects. This type of animosity can be observed in all developed countries, but the one plaguing the NC is an exception. Girija Koirala and Sher Bahadur Deuba are fighting over trivial issues. The most important issue is of the Maoist insurgency. It is not only the responsibility of the ruling party but also of the citizens to find a solution to this uncertainty and infighting.

- Pravesh Saria

Of course, it will have a negative impact on Nepalese mainstream politics. As the ruling majority party, confrontation and wrangling within the NC will have adverse impact on development endeavours and on the country as a whole. There is a lingering threat of possible split in the party. If the dreaded split shapes up, it will immediately affect the present government, giving way to coalition government, or to snap polls.

- Jonathan Charles

Certainly, the tussle for power within the NC has negative impact on Nepalese politics. It will affect not only the party but also the country’s development. NC is the leading party of the country and it must take responsibility of the country’s development. If this party is united, no other parties will be able to replace it.

- Pramod Bhattarai

Democratic parties believe in healthy competition for leadership. But the prevalent ills within the NC for the top party job is deplorable. Nevertheless, I still believe that the NC can and will lead the country towards development and prosperity. But it is saddening to see that NC leaders are deviating from the original principles of the party. The NC has survived and will survive all types of intra-party crises, and now the time has come again to show its rivals that it can cook a patch up this time, too. Let the two veteran leaders come forward and peacefully hand over their responsibilities to second generation leaders, and let them stay back, monitor and guide party policies.

- Udaya Shrestha

In a multiparty system, parties may differ on the means of achieving national interest. But it does not allow them to further their own interests. The NC is abusing its authority to gain power and money. This is highly deplorable as it should be setting a good example. People are fed up with the NC leaders’ performance and are looking for able and faithful leaders.

- Bal Krishna Sharma

Believe it or not, the NC claims to be a democratic party, and even goes to the extent of equating itself with democracy. This very notion is undemocratic. Girija Koirala is ruling the party with an iron hand. Can you call this party democratic? As a party which has ruled the country for a long time since the restoration of democracy, the internal affairs of the party does influence politics. In order to find a way out of this mess, NC bigwigs must hand over the party presidency to a young and dynamic leader. If the NC elects Koirala again, then you can easily understand what the oldest and largest party in Nepal stands for.

- Niva KC