Presumptive Taxes
Assessing Origin & Its Practice

By Rup Khadka

Presumptive taxation is a system of taxation under which income tax is levied on average income in place of actual income. Under this system, taxes also can be levied with annual flat rates on certain types of income or taxpayers. Anyway, tax is not levied on net income but on a notional average income for all taxpayers within one line of business. There is a practice to levy presumptive taxes on income where it is extremely difficult to impose a normal income tax on net income assessed on the basis of actual income and expenses of a taxpayer.

Nepal has been practicing the presumptive taxes since the early 1960s. For example, the Income Tax Act 1963 fixed 90 per cent of the total income from house and land rent, interest accruing from investments in cash or kind, and from professions as the net income for tax purposes. Similarly, the presumptive basis was adopted in the case of agricultural income, which was brought into the tax net sometime in the 1960s and 1970s. Similarly, 15 per cent of the contract amount was considered as net income in the case of a timber contract with foreign contractors. In the case of goods imported from countries other than India, the net income was 15 to 30 per cent, depending upon the nature of goods, of the import license value. Presumptive basis was also adopted in the case of cinema halls where income tax was levied at the rate of 7 per cent on the assessed entertainment tax.

Similarly, the presumptive basis was introduced for some time in the case of distilleries producing country liquor under minimum guarantee system, where certain per cent of the minimum guarantee amount or excise amount, whichever was higher, was considered as the net income for income tax. In the case of small contractors whose contract amount does not exceed Rs. 1 million are taxed at the rate of 1 per cent on grocery (ration) contracts and 2 per cent on other contracts.

Presumptive basis has also been adopted in the case of foreign airlines. For example, income tax is levied at the rate of 5 per cent of the total turnover arising in Nepal in the case of foreign airlines operating air service to and from Nepal whilst the tax is levied at the rate of 3 per cent on total turnover in Nepal in the case of foreign airlines which only had offices in Nepal but does not operate air service to and from the country.

The scope of presumptive tax was extended further in the early 1990s. For example, in 1993/94 specific types of entrepreneurs (such as retail rice shops, cold drinks stores, butchers, fruits and vegetable shops, tailoring, laundering, hair dressing) having up to Rs. 450,000 annual turnover or Rs. 45,000 net income but who have remained outside the tax net in the past were given an option to apply for an annual income tax of Rs. 1,500. The annual rate of presumptive tax was reduced to 1000 in 1994/95, which continued until 1996/97. In 1997/98 the transaction and net income figures were raised to Rs. 500,000 and Rs. 50,000, respectively and rate of tax was reduced to Rs. 750.

In 1998/99, taxpayers with an annual transaction up to Rs. 700,000 or net income up to Rs. 70,000 were required to pay a presumptive income tax of Rs. 1,200 in metropolitan or sub-metropolitan cities, Rs. 1,000 in municipalities and Rs. 750 in other areas. In 1999/2000, a presumptive income tax of Rs. 1,200 in metropolitan or sub-metropolitan cities, Rs. 1,000 in municipalities and Rs. 750 in other areas is levied on taxpayers whose annual transaction is up to Rs. 800,000. Presumptive tax has also been levied on vehicles in the form of an annual flat tax.

Thus presumptive taxation has been adopted on administrative grounds. However, such a system is not desirable for more reasons than one. The presumptive basis is fixed arbitrarily. Since rate of profit may vary considerably even in the same line of business, depending upon several factors, such as the scale and efficiency of the operation, it is not possible to levy income tax on actual income of a taxpayer under the presumptive system. This leads to inequity in the tax system. The presumptive system also serves as a hindrance to the development of sound business accounting practices, which is necessary if tax administration and tax compliance are to improve.

It is, therefore, necessary to limit the scope of the presumptive taxation. It should be levied on those types of incomes or taxpayers that cannot be brought into the tax net otherwise. Even in such cases, it would be desirable to keep the presumptive rates fairly high so the taxpayers would be encouraged to come under the normal income tax regime.

The draft Income Tax Act 2001 has limited the scope of presumptive tax. Under this law, presumptive tax will be limited to the small taxpayers whose annual net income is up to Rs. 100,000 or annual turnover is up to Rs. 1,000,000. This type of taxpayer will be subject to the
presumptive flat annual taxes. The rate of tax for individuals conducting business in the Metropolitan or Sub-Metropolitan Cities will be Rs. 2,000; for individuals conducting business in Municipalities will be Rs. 1,500; and for individuals conducting business anywhere else in Nepal will be Rs. 1,000.

German Aid In Microfilming Manuscripts

By Shaphalya Amatya

THE Nepal-German Manuscript Preservation Project (NGMPP) came into existence on 16 February 1970. It was established with the sole objective of preserving the written heritage or manuscripts kept in the National Archives of Nepal. In the first phase of this project from 1970 to 1975 the project concentrated its activities in microfilming more than 35 thousand volumes of manuscripts housed in the National Archives. On the request of Deutsche Morgenlandische Gesellschaft (DMG) the German partner His Majesty’s Government gave extension to this project from 1975 to 1980. In this phase, HMG granted permission to the project for microfilming manuscripts and blockprints available in the governmental institutions, semi-governmental institutions, religious trusts and corporations, temples and monasteries, libraries and private collections of Bagmati Zone with the prior approval of the owner or outodian of the property. During this period the project microfilmed the collection of the Kaisher Library.

With the success of the project and convinced by the utility of microfilms for modern day research, HMG gave another extension into this project from 1980 to 1985. With the extension the project also received the permission to do microfilming all over the Kingdom except in restricted areas. During this period the microfilming team covered the districts like Kaski , Gorkha, Janakpur Langtang Helambu, Jumla, and Jomosom /Muktinath. About 16,170 Sanskrit Manuscripts and 4,877 Tibetan Manuscripts were microfilmed by the team. The fourth phase of the project started in 1985 and was terminated in 1990. During this phase the project concentrated its microfilming activities in Northern region of the country. Since the northern part of the country contains people with centuries old Tibetan influence they are rich in Tibetan manuscripts. In this part of our country we have hundreds of monasteries where Tibetan manuscripts, throwing lights not only in Tibetan Buddhism but also in the history and culture of Northern Nepal, are found in abundance. The project sent expeditions to Dolpo, Jumla, Nubri, Junbesi and Tenboche in Solukhumbu region Drumda/ Thimi, in Southern Mustang, Kshaden/Sermathang in Helambu region. These missions microfilmed about one thousand manuscripts.

With the cooperation of the project the collection of microfilms in the National Archives was increasing day by day. The need of a proper storage of these valuable microfilms was felt by both Nepalese and German authorities and scholars. In 1988 an agreement was signed between HMG and German. Government for the construction of a Microfilm Archives at the premises of the National Archives. The foundation stone of this building was laid by the then H.E. Dr. Martin Schnller and this writer, himself then serving as the Director General in February 1991. The Microfilm Archives was prepared within the time frame and it was officially opened in August 1992. At present, this Archives has not less than 200,000 manuscripts in mocrofilms. It is one of the most well equipped Archives of South Asia with most sophiticated Microfilm Readers, Microfilm Cameras, and so on.

The fifth phase of the project was started from 1990 to 1993. During this phase expeditions were sent to Muchu (Humla), Ro (Nubri region) and Tarap (Dolpo Rogion). A large collection of Tibetan manuscripts brought from Olangchunggola of Taplejung District in Eastern Nepal, which were housed in the National Museum, were also microfilmed. The microfilming of Guthi documents were contiuned.

The Sanskrit manuscripts which are found in Nepal has a long history and tradition. This intellectual heritage in the forms of manuscripts and cocuments were brought by early immigrants from Indian sub-continent to the Kathmandu valley and other parts of the Himalayan regions. These written heritage are the only dependable source of knowing the life, culture and history of the people of Indian sub-continenent before the Muslim invasion. They are pure and untouched or mot mutilated by outside invaders. Hence the value and importance of this heritage is priceless and immense.

The sixth phase of the project was started from March 1993 to February 1996. During this period expeditions were sent to Ro/Samdo in Nubri region, Helambu, Tsum in Gorkha District, Dolpa, Bridim in Langtang region and Phole in Taplejung District. About 21129 twenty-one thousand one hundred and twenty-nine manuscripts were microfilmed. The seventh phase or more or less the last but not the least of the project began from March 1996 and ended in February 1999. But as some very important works have to be completed it was given another extension for the period of two years, accordingly the project was officially terminated in February 2001. In this phase the project was very active and it sent expeditions to Dolpo, Mustang, Phole (Taplejung), Thame (Solukhumbu), Nurbi (Gorkha) and Phu Gaon (Manang). Mocrofilming of Guthi document from various branch offices like Bhadrakali, Kalmochanghat and Pasupati were continued. The most noteworthy achievement of this period was the microfilming of the golden Kanjur of Mustang. It is famous as the LoManthang Kanjur belongs to the Mustang Raja. It was complied during 1382 to 1456. It is in 102 volumes written in golden script.

On 20 February 2001, the three decades old project of microfilming written heritage of Nepal came to be closed.

Personally, I am very unhappy by this closing because I was involved in this noble and great project since its inception. It reminded me the faces of Dr. K. L. Janert and Dr. Voigt who came from Germany to sign this project agreement back in 1970. The intrest and deep commitment of German scholars in enriching their knowledge in subjects like religion, art, history, culture, philosophy, astronomy, grammar, Tibetan Buddhism, and so on which are the valuable contents of our manuscript heritage and which are preserved in temples, monasteries, houses and libraries all over the country were responsible for materialising this project. Most probably it was this project which continued for the longest period of time from 1970 to 2001 in the history of Nepal. Many renowned German Sanskrit scholars and Tibetologists came to Nepal under this project to supervise its activities and to make their researches. This Nepal-German Microfilm Preservation Project has not only enriched the wealth of our National Archives but also made it popular all over the scholarly world. A copy of all these microfilms is kept in Berlin Library for the benefit of international scholars. Those who are interested to possess a copny of these manuscript in microfilm can get it from National Archives of Nepal by payment. As we know there is no limit to knowledge there is no limit of these manuscripts. But for three decades this project NGMPP had done a very commendable and tremendous job of preservation of written heritage of mankind in Nepal which can never be forgetton.

Vanishing Cultures

By BT

WE TAKE pride in shrinking distances among the nations but it is this very fact that has posed unprecedented challenge for those who aspire to keep their distinct cultures and identities intact. The diversity of cultures with separate identity of their own is a great wealth of the globe. However, modern advancement in information and technology has given birth to a sort of indomitable bulldozer that is leveling the rich variety into an evenness of monoculture.

Crumbling international trading barriers, travel of information at the speed of satellite beams, emergence of ever faster means of global travel and above all, the tendency to discard the old in favour of the new have put the distinct identities of nations and nationalities under threat of extinction. The rising wave of globalisation may have brought desirable results from many other respects, but for the cultural purists and conservatives this trend has emerged as a juggernaut demolishing the foundation of age old tradition and culture.

One of the inconsistencies of the information revolution has been that the people in the third world countries are spoon fed with the fares prepared in media mills in the west while the underdeveloped countries have no means at their disposal to promote their unique cultures and ideas in other countries. When communication becomes virtually one way or an upper-hand lower-hand matter, there is no question of reaping mutual benefits through cultural exchanges. When satellite television channels bombard your screens with materials that promotes their way of life and poor nations can give nothing in return, the emergent situation is far from being balanced. The consequence is that culture and identity of one side fosters at the demise of the other.

Being at weak position in terms of communication technology does not mean that third world countries lack rich culture, philosophy, religion, art and technology worth learning and applying. But in the world where the upper hand is determined by the access to the tools of promotion and propaganda, things that deserve to be followed remain in shadow. People prefer to copy things and ideas repeated in the media and tend to forget those that were part of their own life for a long time. Environmentally hostile technologies that brew the flashy and fast mode of consumerism have replaced our time tested and sustainable systems. The Ayurvedic system of medicine could not withstand the imperialism of the modern chemical medicines as the former could catch attention through mass communication. Just as industrial revolution had its adverse ramifications on environment and ecology, information revolution has pushed the diverse cultures in many countries to the point of survival crisis. When ‘technology transfer’ and ‘cultural exchange’ flow one way, this kind of globalism takes the toll on human values, cultural heritage, tradition-bound social harmony and environment friendly way of living.

Do not think that imperialism is over. It is still alive and well in the form of the control over the satellite media that disseminate vivid visual messages to your bedrooms. It is more than ever before that the gaudy and noisy western cultures are making the interfering penetration into the indigenous setup of the nations like Nepal.

The miraculous leaps made in the field of communication technology has offered access and exposure to new ideas and opportunities. Present day reality is such that a country cannot practically live in isolation from the global interaction and interconnection. Yet, the indigenous cultures and identities are something that cannot afford to be swept and eliminated in the hurricane of globalisation. Just listen, you can hear the SOS call out there!