KATHMANDU, Sept 13: Although the government talks about minimizing its dependency on import-based revenue by mobilizing internal revenue sources for sustainable financial resources, it still continues with its plan to generate a larger portion of its revenue from imported goods.

The Domestic Revenue Mobilization Strategy (DRMS) 2024, unveiled by the Ministry of Finance (MoF), shows that the government aims at reducing the share of customs duty in the country’s gross domestic product (GDP) to 4.5 percent in the next five years. Currently, the figure stands at 4.8 percent.

Likewise, the government aims to reduce the contribution of import-based excise duty to the GDP to 0.6 percent from 0.8 percent by fiscal year 2028/29. Similarly, the government aims to achieve an import-based VAT to GDP ratio of 3.8 percent from the existing 3.5 percent.  

The DRMS talks about increasing the contribution of income tax to the public revenue collection to 6.9 percent of the GDP in the next five years. As of the last fiscal year, the contribution of income tax was 5.7 percent of the GDP.

According to the government plan, it will focus more on corporate income tax than personal income tax to generate a sizable amount of public revenue. While increasing the personal tax to 3.7 percent from 2.9 percent of the GDP, the strategy aims at increasing corporate income tax to 3.2 percent from 2.7 percent.  

Likewise, the government has aimed at increasing the ratio of total public revenue to the country’s GDP to 23.5 percent by the end of the fiscal year 2028/29. As of FY 2022/23, the figure was 18.9 percent.

Citing the need to increase the contribution of public revenue in its annual budget, the government has planned to reduce the budget deficit through a notable increase in the revenue collection. The medium term revenue mobilization strategy talks about enforcing a clear structural roadmap for reforms in the taxation policy, besides prescribing administrative reform.

The main objective of the DRMS is to increase business efficiency by reducing the distortionary effects of taxation and to increase equity in income and wealth distribution through progressive and climate-resilient tax structure and prudent public expenditure management.

Moreover, the DRMS also focuses on revenue mobilization from domestic sources to enhance fiscal stability by enhancing the taxpayers’ voluntary compliance with tax laws and operating system, strengthening risk management capability of tax and customs administrations, improving automation in tax and customs administration and through improving inter-governmental and inter-organizational coordination and collaboration for tax policy design and implementation.

Meanwhile, an increasing number of foreign companies providing digital services have been included in the government’s tax bracket of late. According to the Large Taxpayers’ Office under the Inland Revenue Department, a total of 18 foreign digital service companies, with an added nine companies in the last fiscal year, have paid taxes to the government.

Google Asia, NCS Parsons, LinkedIn, Meta Platform, Microsoft, Amazon Web Series, Amazon Service, Google Ireland, TikTok, Adobe System, Netflix, Zoho Corp, Google Digital Inc, Prometric Japan Company, IBSCO International Inc, Apple Distribution International Limited, Pearson Education Limited and Association of Chartered Certified Accountants are among the companies that have filed their taxes to the government for providing their services in Nepal.

 
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