Private sector hails government for keeping tax rates unchanged, asks for more focus on implementation this time around
KATHMANDU, July 15: Finance Minister Ram Sharan Mahat presented the budget for Fiscal Year 2015/16 on Tuesday. The budget for the new fiscal year has received mixed reactions from economists, former minister and industry people. Most of them have suggested to the government to put in place a strong monitoring mechanism for implementation of plans and programs included in the budget. They have also said that the finance ministry must fulfill promises made in the budget and make sure that development programs are implemented thoroughly.
Similarly, private sector has welcomed the government decision of increasing tax net without increasing the tax rate.
Republica has collected reactions of former minister, former bureaucrat, economic experts and representatives of private sector to the budget. Excerpts:
Budget not clear about agro-projects
Bhairab Raj Kaini, Former DG, Department of Agriculture
The budget has announced programs to reduce import of different farm products and continued subsidy programs. The government is launching paddy mission throughout the country to increase paddy production and discourage its import. Moreover, it has announced to take irrigation programs in arable land throughout country. The budget has introduced programs to encourage commercial farming of foods and vegetables and make agro-industry IT-friendly. The budget, however, is silent on how these programs will be implemented. For example, it is not clear whether the irrigation facility will be monsoon-based or will be in operation round the year. I think the implementation side will be challenging. We have number of programs, but we lack clear vision to implement them. The government has allocated Rs 26 billion for the agriculture sector. Now, the ministry should come up with concrete plans and policies to mobilize the budget in different programs in a time-bound manner.
Budget lacks focus, specialization
Surendra Pandey,Former Finance Minister
The budget seems to have touched every sector. However, it has not properly focused any sector except reconstruction. The budget has targeted economic growth of six percent.
But the government has not introduced any strategy or plans to achieve the target.
The budget has put focus on infrastructures and hydropower sector. But it is silent on how intends to implement projects of these sectors.
Programs in hydropower sector are comparatively better, but no planning has been done to implement them. The government has to come up with visionary plan to implement its programs.
Moreover, it should establish National Reconstruction Authority (NRA) as soon as possible and implement all reconstruction projects and programs through the authority.
Drive to promote banking system praiseworthy
Plan to bring 300 e-buses to city receives mixed response
Upendra Poudyal, President, Nepal Bankers Association
This budget has addressed almost all our expectations. However, it lacks programs to raise development expenditure significantly. The development expenditure could not go beyond 40-50 percent in the current fiscal year. If the development expenditure increases, the government can make more internal borrowing. Rise in development expenditure also increases economic activities. The budget, however, is positive toward banking sector. The new campaign 'one household, one bank account', which the government announced in the budget, will help to increase financial inclusion. The announcement to accept government revenue worth more than Rs 500,000 only through checks, promote branchless banking and other alternative banking channel, and expanding social security system through banks in more districts are praiseworthy.
National Reconstruction Authority should be formed immediately
Hari Bhakta Sharma, Vice President, CNI
There are many positive things in the budget. But the main thing is they need to be translated into reality. We need special mechanism for speedy and time-bound execution of such programs, but the budget is silent on this issue. Target should have been made to complete Upper Tamakoshi Hydropower Project within one and half years rather than two years as energy availability is key to attracting investments. Though it has already been more than a month that the legal basis for National Reconstruction Authority was approved, the authority has not been formed. The authority has to be formed without further ado. Plan to construction Kathmandu-Tarai Fast-track road and other highways is praiseworthy as road constructions contributes a lot in economy. We had expected some major investment in industrial estates to revive the industrial sector, which has been deteriorating with every passing year, but it didn't happen.
6% growth target unattainable
Madan Kumar Dahal, Economist
The government deserves applause for its success in introducing budget within mid-July. Most of the programs and plans in the budget are nothing more than the continuity of programs from the current Fiscal Year 2014/15.
The government has brought the budget within the ceiling fixed by the National Planning Commission which is praiseworthy. However, the economic growth target of 6 percent for the upcoming Fiscal Year 2015/16 set by the government is extremely ambitious. The average growth rate in the last fiscal year is 3.5 percent. This year it failed to meet target of 5.2 percent maybe because of the devastating earthquake. We are now planning to get back to the normal position within five years through reconstruction which is the main emphasis of the budget.
Given the government and private sector's current efficiency level, the economic growth rate of 6 percent is unattainable. How can the government set 6 percent growth target without introducing any strategy to boost capital expenditure which stood at mere 45 percent in Fiscal Year 2014/15?
Govt respected our sentiment by not increasing tax rate
Saurabh Jyoti, Chairperson, Tax and Revenue Committee of FNCCI
Listening to our suggestions, the government pursued the policy of expanding tax net instead of increasing tax rate. Industries and business firms that were hit hard by the earthquake will be relieved by the government decision. It seems that the government has understood the sentiment of the private sector. Tax incentives and facilities to various businesses, particularly tourism and special industries, are some of the remarkable features of the budget. The government has increased threshold for filing VAT to Rs 5 million from Rs 2 million. The increased, threshold, amount is not significant. We had urged the government to increase such threshold to at least Rs 10 million. The government has promised to take private sector together for reconstruction and we are looking ahead for our active participation and representation in the reconstruction campaign.
No significant measures to reduce trade deficit
Purushottam Ojha, Former Commerce Secretary
The budget did not introduce any significant measures to reduce ballooning trade deficit.
However, the plan to give priority to production and export of some non-timber and forest products, which have high-value, is encouraging. I think the government should have introduced programs to encourage use of domestic products in reconstruction works.
It could have reduced imports. The budget did not bring any plan and incentive to the small and micro enterprises that are seeking international market for their products.
We have comparative advantages in some of the service sectors. While the budget has given priority to tourism and hydropower, it has kept mum on service trade in other sectors like education and health.
Budget has addressed the demand of private sector
Bhawani Rana, Senior Vice President, FNCCI
The good thing about budget is that it has addressed must of the demands forwarded by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). The government has raised VAT threshold to Rs 5 million which was one of our primary demands. In the similar manner, the government kept tax on industrial materials unchanged. The budget has put focus on industrial sector as it has vowed to increase road connectivity and arrange power supply to every industry, basically cement factories. Similarly, the decision to reduce income tax for those who have made donation to the Prime Minister Natural Disaster Relief Fund needs to be welcomed. The program to provide skill-oriented trainings to 50,000 youths is also praiseworthy. Though the budget has no major changes compared to previous year, it has addressed each and every sector of the economy including tourism, industry, hydropower, agriculture, health and education.
Budget allocation for airports encouraging
Yogendra Shakya, Tourism entrepreneur
The budget allocated for upgradation of airports, including Tribuwan International Airport (TIA), and construction of Gautam Budhha International Airport in Bhairahawa is encouraging. But the government did not bring any concrete survival plan for tourism industry which was very much needed. In the absence of survival plan, many hotels like Blue Star, Narayani and Sherpa closed down during Maoist insurgency. We do not want the situation to repeat again. The government has announced to give 30 percent income tax exemption for tourism enterprises. I don't think it will solve the problem as most of the industry will have negative balance sheet for the coming fiscal year. Priority has been given to conduct safety audit of tourist destinations which is praiseworthy. I think safety audit should be done immediately.
Budget is development-oriented
Kishore Thapa, Former secretary, Ministry of Urban Development
As expected, the budget has put focus on reconstruction works. The budget is development-oriented as it has kept reconstruction processes at its center and given continuity to mega projects.
It also focuses on housing sector, road connectivity and greenery.
The budget, however, has not addressed implementation side.
Though the budget has put focus on development, it is the private sector who are directly involved in development activities. But the budget lacks programs to boost capability of the private sector and the construction industry.
I think the government should put focus on increasing capability of corporate houses to expedite development projects.
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