Municipal Tax Revenue
An Analysis Of The Sources

By Rup Khadka

WHILE municipalities have been authorised to levy various taxes since the early 1960s, they confined to depend heavily on octroi for revenue. On average, octroi generated more than 80 per cent of total municipal tax revenue. For example, in 1998/99, municipalities generated Rs. 702 million from octroi out of total municipal tax revenue of Rs. 869 million. Vehicle tax has been the second largest source of tax revenue of municipalities. This source generated Rs. 112 million, which was 12.84 per cent of the total tax revenue. Professional tax has been the third largest source of municipal tax revenue. It proved Rs.11 million revenue, which was 1.29 per cent of total tax revenue. While both roof top tax and house rent tax were created in the early 1960s, these taxes remained negligible from the revenue point of view until the end of the twentieth century. This may be seen from their meagre contribution (roof top tax 0.07 per cent and house rent tax 0.19 per cent), to the total tax revenue.

Municipalities have largely been failed to use taxes assigned to them other than octroi. After the abolition of octroi in 1999, they, have been relying on the local development fee, which has been adopted as a temporary measure for the replacement of octroi revenue.

It must be noted that octroi was an outmoded, inequitable and inefficient tax that did not satisfy most of the criteria of a good local tax, including accountability, autonomy, non-exportability and localisation of tax base. Since octroi was collected at the city gates and included in the selling price, local people were not aware of the burden of octroi. They were consequently not concerned with the use of octroi. Since the rate of octroi was fixed at one per cent by the Municipal Act, municipalities did not have any autonomy to fix the rate of this tax as per the local conditions. This tax used to be levied even on goods that were purchased in the municipal area but taken outside the municipal area. This means that the burden of octroi was not limited within the area of tax levying municipality.

Octroi also suffered from several practical problems. As vehicles were stopped at several points for the purpose of this tax, it not only created inconvenience to the importers, transporters and passengers but wasted time and energy and increased cost of production. As free flow of traffic and trade was hindered, it interfered with the growth of trade and industry.

These problems of octroi were noticed long ago, and particularly the business community opposed octroi very much. Several task forces were set up to recommend measures to solve the problems of octroi and to explore its alternatives. In this context, the Municipal Act was amended in 1988 when many matters relating to octroi were clarified, the rate of octroi was fixed at one per cent and all non-legal charges being collected together with octroi were abolished. The 1988 amendment also made the provision that the rate of octroi will be reduced to 0.50 per cent on July 16, 1993 and the tax itself will be abolished on July 16, 1998. The intention of this provision was to abolish octroi in a phased manner.

This philosophy was, however, ignored over the year. The Municipal Act 1992 abolished the provision, which stated that the rate of octroi would be reduced to 0.50 per cent in 1993 and the tax would be abolished finally in 1998. Further, municipalities started collecting octroi under the contract system. The tax became very much debatable. The Tax System Review Task Force 1995 recommended the abolition of octroi. The Task Force on Alternative to octroi, which was set up in 1996 also, recommended the abolition of octroi. Considering the possible abolition of octroi, the High Level Decentralisations Co-ordination Committee 1996 in its report did not mention octroi as a source of municipal revenue. Consequently, the Local Self Governance Act 1999, which was designed on the basis of the report submitted by the High Level Decentralisation Co-ordination Committee, did not include octroi in the municipal tax family, and the tax was abolished with the implementation of the Local Self-Governance Act of 1999 on April 29, 1999.

A local development fee was introduced as an interim measure for the replacement of octroi revenue. It is levied at the rate of 1.5 per cent of import value and collected by the customs offices together with the import duties. The task force on alternative to octroi had dasigned a detailed system for the collection of local development fees and the distribution of revenue generated through this fee among the municipalities. it recommended that the total revenue collected through this fee should be distributed among the municipalities in proportion of their collection of octroi in the last year of its existence. The revenue collected through the local development fee should be distributed to the municipalities to the tune of 90 per cent, 75 per cent, 50 per cent and 25 per cent, respectively in the second, third, fourth and fifth years. The balance should be distributed to the newly created municipalities on the basis of population,tax potentiality, level of development, and so on .

The idea behind this was to reduce reliance on the local development fee gradually, develop other taxes and finally abolish local development fee. However, local development fee regulations made the provision that municipalities should get revenue through the local development fee fund at least equivalent to the amount they had collected through octroi in 1997/98. Further, it has been decided that in the fiscal year 2000/01 and onwards, municipalities will receive 15 per cent more than their revenue collection through octroi in 1997/98. Such a provision will never create an environment under which municipalities will make serious attempts to develop other taxes. The history shows that municipalities did not make any attempt as long as they received easy money through octroi. Since now, local development fee has taken the position of octroi and municipalities are not serious in developing other taxes.

The future of the local development fee is uncertain in the context of the possible entrance of Nepal to the World Trade Organisation. It is, therefore, recommended that municipalities should develop property taxes, which are good member of municipal tax family, as their major source of revenue. However, property taxes cannot be developed as major source of municipal government revenue over night. It will take some time. Property taxes alone would not be sufficient to generate the required amount of revenue for the municipalities even in the long run. So municipalities should develop other taxes such as vehicle tax, entertainment tax, professional tax, hoarding board tax, as supplementary to the property taxes. They should rationalise the rates of land revenue, establish and develop house and land, broaden the coverage of professional tax and institutionalise tax assessment and collection procedures to enhance their own revenue collection.

All Eyes On Afghan Battlefield

By John J. Lumpkin

IN a war where the enemy prefers the shadows to open warfare, technology to find him becomes as important as the technology to kill him.

Air Force officials say some recently developed reconnaissance and communications technologies have come into their own in the war in Afghanistan, and they provided The Associated Press previously classified details of several strikes to demonstrate their point.

Many of these systems are also seeing action in the battle at Shah-e-Kot, officials said.

One airstrike originated last November when intelligence units in the United States and Afghanistan heard reports of an impending meeting of Taliban and al-Qaida leaders near Kandahar’s airfield.

To check out the reports, U.S. forces dispatched a Predator unmanned aerial vehicle, a surveillance drone the size of a small private plane. At the same time, a modified Boeing 707 airliner called an E-8 Joint STARS, cruised into the area, its radars scanning the ground for vehicle convoys.

It found one. The column of vehicles was heading toward the airfield. The Predator’s remote controller trained the craft’s video camera to track it.

Air Force officials pointed to this account as a typical example of the anatomy of a successful Afghan airstrike. Many eyes are placed around and above the battlefield, and - thanks to new communications and computer links - commanders are able to correlate what they are seeing.

Officials acknowledge the targeting process isn’t perfect - several bombs have gone astray during the war, killing or injuring U.S. troops, allies and Afghan civilians. But they say it’s vastly improved over Vietnam War days, where bomber pilots were lucky to have a single blurry reconnaissance photo of a target site.

In the Air Force’s account of the strike on the meeting, officials said reconnaissance also noted a mosque near the expected meeting site, which was highlighted to pilots as a target to avoid.

Commanders sent an AC-130 gunship to attack the meeting site. The AC-130 is a loud, slow, propeller-driven variant of a cargo plane that is bristling with guns and able to deliver devastating fire to ground targets.

Over the next several hours, the Predator observed the meeting place as the AC-130 approached.

Once it arrived, the Predator, which can transmit video directly to the AC-130, directed the gunship to attack trucks, people and buildings at the meeting site. After the strike, the mosque stood undamaged.

Predators and AC-130s working in tandem allow the gunship to make quick, deadly passes. The Predator is small and quiet enough that it isn’t always seen from the ground. Without it, an AC-130 must orbit a target to line up its guns, leaving it exposed to ground fire and giving people below plenty of time to flee.

Some of these technological advances made their debut in the 1999 NATO war against Yugoslavia, and officials said they saw wider use in Afghanistan, where combat relied heavily on intelligence separating friends from foes.

In another battle in November, a commander in the Afghani Northern Alliance, accompanied by U.S. commandos on horseback, tried to cross a valley that was occupied by a large Taliban garrison. The commandos used satellite radios to call air war headquarters for an airstrike, and a B-52 bomber was dispatched.

To guide the bomber, the commandos used a targeting rig called a Viper, which includes a laser range-finder, a laptop computer with a digital map display and a Global Positioning System receiver, to come up with target coordinates. A radioman called in the numbers to the bomber.

Twenty minutes later, the B-52 struck the Taliban positions in the valley.

"The air strike resulted in heavy Taliban casualties, the destruction of fighting positions and artillery pieces and significant damage to a command bunker," according to a written account of the battle provided by the Air Force.

In a third battle in December, unspecified human intelligence sources - perhaps anti-Taliban fighters in the region - told U.S. forces they suspected that al-Qaida and Taliban leaders were hiding in an abandoned aqueduct and power plant near Kandahar.

A Global Hawk - a new, high-flying unmanned drone that made its combat debut in Afghanistan- found al-Qaida and Taliban fighters in the area, and the site was put on a U.S. target list. Within two days, 10 attack jets bombed the aqueduct and power plant.

Air Force officials acknowledge that not every bomb found the right target. Human error - entering incorrect coordinates for a satellite-guided bomb, for example - can have deadly results.

The U.S. Central Command, which is running the war in Afghanistan, has not completed investigations into several bombings of the wrong targets.

They include two strikes on a Red Cross compound in Kabul in October, the Dec. 5 bombing of a U.S. position near Kandahar that left three Army Green Berets and six Afghan allies dead, and the erroneous bombing of a convoy of Afghan leaders traveling to Kabul for the inauguration of Hamid Karzai, the Pentagon said.

(AP)

The Fun Of Being Dishonest

By PNK

DOES honesty bring to your doorstep all the bounty of the earth? There just cannot be any single answer to it: there’s always, as goes an old, old story, two possibilities. YES and NO. But, isn’t there a middle path to take in all those who have some support for each side.

Honesty may not bring in windfalls. Pray in earnest and you never know when the goods will be delivered. It may be a long wait. But for some it just comes for the asking. If luck has it or you got the right connections, you might land up with the plum job at the customs. This is, however, not to point this tiny finger that everyone there is dishonest. So there are honest people. How to distinguish? That’s a tough question to answer. Both ‘species’ possibly are given to drinking, wearing 50 or 100 grammes of gold necklace, and the list may go on and on. One may have capitalised on the post that he or she occupies, the other may have cashed in on ancestral property.

The question gets all the more complicated when there are people who are corrupt but they have a pot belly despite consuming much less calories than their actual requirement. May be food for thought or conniving gives them the necessary calories. On the other hand, there are some who may be raking in cash as a farmer does when he has a bountiful harvest yet they are lean and thin and Shakespeare has spoken out through the mouth of one of his characters that such "men are dangerous". Maybe it’s true as it is said that the brain needs a lot of energy to function. So the shrewd and cunning or the corrupt may be thin (mind you, not everyone but quite a few exceptions as the country is already inhabited by 24 million heads).

It’s OK, OK, but the work never is done. This may be being dishonest. But this is done by those in high positions. Then think about the person in rags shivering in the cold of the mid-winter. Maybe he could be the honest person. It could be he’s a porter. If he says he’ll carry the load, he will. If he refuses, he will not. That could be the reason why he suffers and does not rise beyond his hand to mouth life. See him change his lifestyle. Let dishonesty creep into his pores, he’s a man made. Cheating, decamping with the goods or whatever is against ethics can make him rich. So honesty becomes the worst of policies when it comes to material comfort and who doesn’t like it for himself.

Rags to riches stories may be plentiful but only a few would be the real honest way of doing it. Everyone carries his/her own bit of the story of dishonesty. Whatever that may be can be told in an autobiography—I wish all the millionaires and billionaires wrote theirs and let the world know their story. It possibly will unravel that not all success comes from being honest. There may not be many takers openly but all know within that full honesty works only for a few and only for a short period of time.

The dishonest walk away with the honours and only a few are disgraced many decades after their death when it hardly matters at all. So, like the hare winning the race over the tortoise, ‘dishonesty is the best policy’ might become the best selling quote now.