National 6 (Spotlight Weekly)

Taxing Exercise

With the objective of providing critical inputs, the Nepal Law Society organizes training for lawyers on tax laws and revenue administration post WTO

By SANJAYA DHAKAL

Although Nepal has become the 147th member of the World Trade Organization (WTO) in 2004, many people including the experts are in the dark about its subsequent impact on the country’s trade, revenue and taxation system.

In an effort to train the lawyers about the modern Revenue and Trade Laws, Nepal Law Society (NLS) with the help of Internal Revenue Department organized a three-day workshop (February 11-13), which was participated by around 40 lawyers from different parts of the country.

“Till now we only gave tax education to university teachers, auditors and businessmen. But we have felt that it is equally necessary to make judges and lawyers understand the issue because in the end all our efforts are geared at protecting taxpayers’ rights,” said Rana Bahadur Shrestha, deputy director general at the IRD. “At the IRD, we mostly interpret the laws in a conservative manner thinking that the court is there to interpret it in liberal manner. But many times we have found that taxpayers are not able to appropriately make their case thanks to the lack of understanding of the laws.”

The tax department officials said that unnecessary legal moves would only increase the tax compliance cost, which would ultimately result in deduction of tax.

In view of wide criticism about the complicated nature of the Income Tax Act 2058, the department has been making efforts to educate the stakeholders.

“Since Income Tax is a direct tax, it is naturally a complicated issue. And we also were compelled to make it complicated, at times, in order to curtail the tax avoidance and in order to protect our tax base in view of the entry of MNCs in the country,” said Shrestha.

Apart from tax laws, revenue and trade provisions, the training also educated the lawyers about the revenue implications of Nepal’s WTO membership. Prachanda Man Shrestha, joint secretary at the Ministry of Industry, Commerce and Supplies and coordinator of the WTO Cell, described in detail about the implications.

In course of getting WTO membership, Nepal has bound its custom tariffs – 42 percent for agro and 24 percent for non agro products. Nepal has also committed to do away with Other Duties and Charges at the Custom points like special tariff, local development tax and agriculture improvement tax within 2 to 10 years.

At present, the government gets 30 percent of its revenue from customs tariff, which indicates the lack of trade expansion. “The WTO commitments would lead to Rs 192 million of losses in customs but only if we fail to expand trade. Likewise, in ODC front, the government will lose Rs 430 million and again there is ample opportunity to bring the various ODCs under our domestic taxation and excise net rendering this loss ineffective,” Shrestha added. “Domestic taxation system is within out rights but they will have to be made non-discriminatory,” Shrestha added.

These and other commitments would lead the country towards major reshuffle in its trade, tariff and revenue legislations in the days ahead- requiring the legal practitioners to be trained and aware about the future course.

Nepal has also opened 70 service sectors including legal profession. “But the foreign legal professionals will be allowed to plead cases concerning only the home (home of that lawyer) country law; international law and third country law,” said Shrestha.

NLS has been providing training to legal practitioners including judges and lawyers on the various aspects of tax laws by inviting resource persons. “We want to ensure that such training/interaction provide a forum to exchange problems faced at practical level and seek ways to overcome them,” said Krishna Man Pradhan, executive director of NLS. The Society has been organizing such program under the assistance of RAS Project of DANIDA.

As Udaya Nepali Shrestha, vice chairman of the Law Reforms Commission and former law secretary puts it: “We ourselves have to take the initiatives to learn about new concepts. There is no excuse for us for not learning about new tax laws or WTO because we will need to embrace the world trend.”