A regressive step

The government has just come up with new directives requiring FM radio stations to refrain from collecting and broadcasting news about national and international developments based on their own sources of information. This is a regressive step. The FM stations are now allowed to carry news put out by communications media owned by the government. But news reports received courtesy of or based on other media will first have to be verified independently before being aired. Furthermore, information oriented programming needs to be cleared a week in advance with the ministry of information and communications which can step in to kill such programming. The presence of a representative of the ministry on the governing boards of FM stations that carry news related programming is also compulsory. Opposition has already been voiced to the government’s latest restriction on the mass media and rightly so. It is not difficult to see that the prior verification requirement is a spanner in the works meant to hobble the news gathering and disseminating function which is the essence of a free press. Similarly motivated is the requirement of prior clearance for programming. This amounts to nothing less than potential censorship as does the compulsory presence of a ministry representative on FM station governing boards. None of this sits well with the Nepali Congress government’s oft proclaimed commitment to democracy, with which certain freedoms go hand in hand. At a time when it should be allowing more leeway for communications media under its own control, the government is proceeding in the opposite direction in seeking to restrict private sector media as well.

One wonders why the authorities are acting in this fashion, and why now. One possibility is they are clearing the decks for a clamp down on the Maoist insurgency now that the armed police force is in the making. They don’t want the media to be looking over their shoulders in what could turn out to be a protracted and messy affair. Truth is always said to be the first casualty in war, and the "people’s war" is no exception. In the past we have seen attempts by the government to bring in restrictions on civic rights by the back door, all in the name of stamping out the Maoists. As the anti-Maoist campaign escalates, further restrictions can be expected on the fourth estate. Another likely explanation is the way the Lauda Air scam is becoming an embarrassment for the present government and the need for some damage control. The authorities cannot very well muzzle the press as a whole. That would be too blatant. But it could go for the soft underbelly. It is to be noted in this connection that some of the FM stations have been at the cutting edge of news reporting in the muck- raking mode. Also to be noted is that Mr Girija Prasad Koirala had proceeded to de-fang the Commission for Investigation of Abuse of Authority when the Dhamija scam unfolded. Mr Koirala is now under similar public scrutiny, this time in connection with the Lauda Air deal. All this coming on top of the misgivings expressed by political figures over the growing stake of commercial interests in media organizations does not bode well for the future of journalism in this country.

Nepal and new transit route

By Rajat Sharma

The problems of landlocked, developing countries, which are becoming graver in the context of globalization and the new international trade regime, require urgent attention from the international community. Lack of direct access to the sea has not only entailed additional costs of production but also prevented foreign investors from taking investment decisions in favour of landlocked countries. Understanding and support by transit countries for unrestricted access to the sea and an equal measure of support from the developed countries will go a long way in alleviating these inherent handicaps.

After years of trying to come up with an alternative transit route, Nepal has decided to use the Kakarbhitta-Phulbari-Banglabandh route to Bangladesh. Nepal has been dependent on Indian ports, especially Calcutta, for all its transit needs. This new route also goes through India, although the part that lies in that country is very short, about 53 kilometres. The difference here is the use of ports in Bangladesh instead of India. It is expected that the new route will be a permanent one just like the Calcutta route.

The need for an alternative transit route was long felt in the country. Calcutta port, the nearest, delays cargo shipments. It has even created havoc with Nepali traders at several points in time. Obviously, Nepal could initiate a process to enable itself to use other Indian ports. But they are in no way an alternative to Calcutta port due to sheer distance. When Nepal realized that Bangladesh had to be approached for an alternative to Calcutta port, the problem of choice vanished. The two routes should not only ease the transit problem but also bring Nepal closer to Bangladesh.

Nepal’s dependence on Indian ports, particularly Calcutta, will decrease as a result of the Kakarbhitta-Phulbari-Banglabandh route. It is estimated that nearly 20 percent of Nepal’s import and export cargo will be diverted from Calcutta and Haldia ports to Mongla port. The opening of this new trade corridor heralds a new era of cooperation between Nepal, India and Bangladesh in particular and the South Asian Quadrangle or SAARC in general.

Nepal has exported consignments of about 36 metric tons of dehusked-red whole lentils worth 18,000 dollars to Bangladesh. This apart, in 2000 Nepal exported seven different items worth 23.23 million rupees, whereas l2 different items worth 47.05 million rupees were imported the same year from Bangladesh. However, the export figure declined this year due to non-export of onion and oranges. The items traded through this route between Nepal and Bangladesh include apple, oranges, tomato, zinc, weaning food, tyres, blended wheat, soya beans and pulses.

In 1997, India took Nepal’s request for alternative routes seriously and accorded the facilities for transportation by roadway from the eastern border point at Kakarbhitta to Bangladesh through the Phulbari border point of India. But even after three years of operation, Nepal could not benefit from this transit route as expected. With the opening of an additional transit route, trading communities in Nepal and Bangladesh have attempted to increase the volume and value of exports. Efforts have been made in Nepal to utilize all means of transport available in Bangladesh for the transportation of Nepal’s exports and imports from third countries. Bangladesh is also showing keen interest in effectively utilizing the country’s system of transport and port facilities for Nepali cargo as that would provide additional scope for employment and revenue.

The demand for access to Phulbari was made by Nepal not just for trade with Bangladesh but also for access to Mongla port which provided a much needed alternative route for Nepal’s overseas trade. However, several bureaucratic hassles and other difficulties have rendered Mongla a less viable alternative to Calcutta port.

It is indeed good news that Bangladesh has agreed to zero tariff on Nepalese primary products. However, the Phulbari-Banglabandh route through which Nepali goods can have alternative access to a port besides Calcutta, is yet to flourish due to lack of a proper road, customs clearance and other infrastructure at Banglabandh.

There are many items in Nepal such as stone boulders, stone chips, seeds, fruits, cardamom, ginger, dairy products, handicrafts that could be exported to Bangladesh. At the same time, essential items like paper and paper products, jute, pest spraying accessories for agriculture and the like can be imported from Bangladesh.

This new opportunity has come to both Nepalese and Bangladeshis after the Dhaka visit of Nepalese foreign minister Chakra Prasad Banstola. It is for the governments of the two countries - Nepal and Bangladesh - to take advantage of this visit through the use of the Phulbari-Banglabandh route both for bilateral and multilateral trade using Mongla port as a transit port.

Who’s who formulae for politics

By Rudra Prasad Sharma

In Nepal with Kathmandu as the rumour capital, politics is very unpredictable. Even a government may be changed overnight. For MPs, the House is not necessarily a requisite to oust a prime minister. It may be done elsewhere as well as in a parliamentary committee of a party. Surprisingly, the parties who are Communists in principle try more to prove themselves democratic. The Nepali Congress, which claims to be democratic, tries more to prove its socialistic background propounded by the late BP Koirala. So, in Nepalese politics finding out who is who is very difficult.

But, here is a very easy idea to find out who is who in Nepalese politics? Let’s know them by their party’s name. In Nepali Congress (NC), the ‘N’ stands for "no trust ". It is proven by the squabbling factions, headed by the warlords Krishna Prasad Bhattarai and Girija Prasad Koirala who seldom trust each other. In the Communist Party of Nepal (United Marxist and Leninist), say CPN (UML), the ‘U’ stands for "Ultimatum". It always renders ultimatum to grab the power, but when the time comes it ultimately divides itself. Its principle itself is ultimate. Because, it is now democratic party and it is to be admitted to communism sometime in future.

In Rastriya Prajatantra Party (RPP), the ‘R’ stands for "Royal". It has fewer workers and more leaders who had once a close affinity to the Palace. In CPN (ML), the ‘M’ stands for "misunderstood". What is its difference to CPN (UML)? Perhaps, comrade Bamdev Gautam himself knows about it, but still left to make the people known. In Nepal Sadbhawana Party (NSP), the ‘P’ stands for "Provincialism" for which it always pleads but in vain. In Nepal Workers and Peasants Party (NWP), the ‘N’ stands for "nowhere but in Bhaktapur". But, it is to be seen where it moves in the next election. In Nepal Communist Party (Masal), the ‘M’ stands for "mutual". Being a communist it tries to maintain equidistance to all other communist parties, including the Maoists.

Similarly, in CPN - Maoists, the "M" stands for "Mid night". They target to attack their enemies at midnight like in Dunai and elsewhere. Worst of all, they categorically define their enemies who disagree to agree with them. So, it seems they believe more in their gun power then in principles. To the contrary to all this, they are interested in using the achievement of 2046 changes. Their most celebrated leader, Baburam Bhattarai, in his articles and write ups, always pleads to Geneva Conventions and International Covenants of Human Rights. To this all, the Maoists, although, practising gun power are probably seeking a safe landing for their Revolution.

Last but not the least, politics in Nepal is basically is a politics of rumour which is blamed to be corroborated by Money, Muscle, Media, Mafia and Manipulation popularly known as 5-Ms. If you agree to disagree with me, then, no problem. But, see the Hrithik Roshan episode where the polity submerged in the ocean of doubt and demonstration. So, if you want to know about Nepalese politics, then know the 5- Ms first. Cheerio.

Allowable deductions : Under income tax system

By Rup Khadka

Nepal has been adopting an itemized system of deduction for the purpose of income tax from the very beginning. For example, while the Business Profits and Salaries Tax Act 1960, the first Income Tax Act of Nepal, did not make any provision relating to deductions, such provisions were included in the Regulations developed under this act. The Business Profits and Salaries Regulations 1960 allowed purchase of goods, wages for labourers, rent for land and buildings, interest on loans, maintenance of land, buildings and machinery, depreciation charges, specified taxes, bonus, commission, provident fund, unrealizable accounts pending and other business expenses as deductible expenses. Since originally only business profit and salaries were taxable, all business deductions were included under one heading.

After about three year’s experiment with income tax, the scope of tax was extended to several other sources of income in 1963. The Income Tax Act 1963 divided income sources into various groups and allowable expenses with respect to each type of income were enumerated separately in the act itself. For example, deductible expenses in case of earnings from businesses, insurance companies or agencies were: house and land rent, renovations charges, interest on loans, revenues or any other taxes to be paid on account of house and lands, salaries, maintenance of machinery, furniture and other means, depreciation, and any other amount spent with the motive of making a profit. In the case of house and land rent, investment income or income from professions, 10 percent of total income from these sources used to be considered as deductible expenses. In the case of agricultural income, 3/4 of the total income from agriculture was allowed as deductible expenses.

Under the 1974 act, sources of income have been divided into five headings viz. (a) agriculture, (b) industry, trade, profession or occupation, (c) remuneration, (d) house and compound rents and (e) others. Allowable expenses for each type of income have been listed separately. For example, major business expenses for income from industry, trade, professions or occupations include remuneration paid to employees, rent, interest on loans, administrative expenses, depreciation, transport and travelling expenses, bad debts written off, discount or commission, expenses on repairs to premises, plant, machinery equipment and other assets, discounts and commission, and customs duties, excises, land revenue, registration fees or similar other taxes payable under current Nepalese law. One fifth of the pre-operation expense every year on the basis of an equal division is also deductible.

Similarly, advertising expenses up to two percent of the gross income of an industry or a business firm have been deducible since 1984/85. Besides, one percent of the total income has been allowed as hospitality expenses. Similarly, donations to religious or social organizations are deductible in Nepal since 1974. There is, however, a ceiling. In 1974, a maximum of Rs 50,000 or five percent of net income was deductible. This was raised to Rs 100,000 or five percent of the net income whichever is less in 1980. This system continues to date. Similarly, deductible expenses are enumerated in the law relating to other sources of income also.

Thus income tax laws in Nepal have been specific regarding deductions. There has been a practice of enumerating allowable deductions and those expenses not mentioned in the list are not deductible. This means that some genuine and necessary expenditure may not be deductible. Further, the practices of add back makes the matter only worse. For example, no deduction is allowed for payments subject to withholding taxes, if no tax is withheld on such payments.

The draft Income Tax Act 2001 has abandoned the itemized system of deduction. It has adopted a liberal approach by making all expenses deductible to the extent they are incurred by the person during the year in the production of income from the business or investment. Under this system, expenses are taken into account in a global manner not on a line-by-line basis. This also means that specific types of expenses are not tied up with a specific type of income.

However, a few expenses have still been specifically mentioned and maximum deductible limits have been fixed due to some policy reasons.

Admissible costs relating to repair and improvement with respect to all depreciable assets in a particular pool of depreciable assets of the person shall not exceed five percent of the depreciation basis of the pool at the end of the income-year and the deduction shall be allowed with respect to costs in the order in which they are incurred.

Permissible costs relating to pollution control will not exceed 50 percent of the person’s taxable income calculated without a deduction for pollution control costs. Similarly, allowable deductions with respect to research and development costs should not exceed 50 percent of the person’s taxable income calculated without a deduction for research and development costs.

Any excess cost, or part thereof, relating to repair and improvement, pollution control and research and development for which a deduction is not allowed as a result of these limitations shall be added to the depreciation basis of the pool to which it relates and may be depreciated.

Depreciation, unrelieved losses and bad debt written-off are also deductible. Similarly gifts granted to exempted organizations such as social, religious, educational or charitable organizations of public character registered without a profit motive are also deductible up to Rs. 100,000 or 5 percent of the taxable income for the year calculated without a deduction for gifts, whichever is lower.

However, no deduction is allowed for expenses of a capital nature, which are defined as expenses (a) incurred in respect of natural resource prospecting, exploration, and development; (b) in the acquisition of an asset with a useful life exceeding 12 months; or (c) incurred on the disposal of a liability.

Furthermore, no deduction is allowed for domestic or personal expenses; income tax payable under the Income Tax Act, fines and similar penalties paid to a government and expenses related to the exempt income.

Similarly, a person whose annual turnover for an income-year exceeds Rs 2,000,000 is not allowed a deduction for a cash payment in excess of Rs 50,000 incurred by the person during the year other than in the specified circumstances.