KATHMANDU, June 4: The Confederation of Nepalese Industries (CNI) is dissatisfied with the introduction of a new tax.
CNI has expressed its disagreement about the new taxes by issuing an official statement, five days after the government unveiled the budget for the next fiscal year (FY) 2023/24. The government has introduced foreign travel tax, luxury tax and foreign employment tax as new taxes.
“In the year 2054 BS, the government agreed to tax the private sector by stating that it will impose only one tax - VAT. Except VAT, the government back then had pledged not to impose any other taxes. Now many types of taxes are imposed,” the CNI statement reads, adding that this may worsen the investment environment.
Although the budget presented by the government for the next fiscal year has made some positive efforts to improve the current economic situation, the CNI has expressed doubts that investment will be encouraged and market demand will increase. Issuing a press release on Saturday, the CNI made public its views on the budget.
CNI stated that the capital expenditure has been reduced when investment should have been increased to bail out the economy from recession.
“In order to encourage domestic production, the government has not even addressed its own policy by varying the customs rate of finished goods and raw materials by at least two levels. We have doubts that the budget will give relief to the economy which is in recession,” reads the statement.
The CNI is of the opinion that there is doubt about the effective implementation of the provisions included in the budget. It has highlighted the fact that most of the provisions laid down in the current fiscal year's budget have not been implemented.
It is mentioned in the statement that many of the programs of the budget are good, even though there are doubts about the implementation. The proposal in the budget such as using domestically produced goods in infrastructure projects, revising land delimitation laws, building and operating industrial zones in public-private partnerships, revising the minimum limit of foreign investment, preparing the base for stone and gravel extraction, allocating budget only to projects with site clearance, startups , are welcome, added the CNI
Similarly, it is mentioned in the statement that providing land easily for manufacturing and export industries, adopting flexible labor policy for industries based on information technology and innovation are also positive. CNI is also positive about provisions such as there is no need to get approval when reinvesting the income earned from foreign investment, removal of foreign investment limits in the information technology sector, setting up contact offices in the information technology sector in third countries, providing up to 10 percent of the foreign exchange received from exports for purchasing software or programs and installing equipment.
Likewise, CNI mentioned that positive things have been brought through the budget in matters related to development and construction projects.
“We believe that the decision to submit the environmental impact assessment proposal within 30 days and the provision of felling trees within 15 days of approval will not only prevent the cost of the project from increasing but also help complete the project on time,” said the CNI.
Although the budget has given some new signs of economic reform, the confederation has expressed concern that the instability seen in the tax policy may worsen investment. The confederation said that the investment environment is becoming uncertain as the government frequently changes the tax rates including customs and excise duty every year, as policy stability is needed for investment growth.