Announcing the annual budget for the current fiscal year on Saturday, Finance Minister Surendra Pandey unveiled the revenue policies including expanding tax net to identify persons and sectors not covered earlier, creating conducive environment for investment, and boosting export and substituting imports.[break]
The budget has set targets to provide incentives to import substituting and export promoting industries, minimizing financial crimes, and enhancing contribution of non-tax revenue as an important source of revenue under the new policies.
Presenting the government strategies on implementing the revenue policies, FM Pandey announced observing the Fiscal Year 2010/11 as ´Tax Implementation Campaign Year´.
Minister Pandey urged all individuals and entities including doctors, artists, journalists, media houses, engineers, lawyers, auditors, businessmen, industrialists, investors, consultants, commission agents, retired or incumbent officials of public posts, teachers and professors to get their Permanent Account Number (PAN) registered.
"Those persons or entities failing to get PAN shall not be liable to get payment from government budget or grant or shall not be involved in such work bearing government budget," Pandey said.
The budget has made it compulsory for educational consultancy, discotheque, health club, catering, party palace business, mechanically operated dry cleaning service and restaurant with bar operating in municipalities and other areas specified by Inland Revenue Department to register at Value Added Tax (VAT).
- To expand tax net, encourage export, create investment friendly environment
- Observe 2010/11 as Tax Implementation Campaign Year
- Discotheque, health club, catering, party place under VAT
- 40 percent tax exemption on infrastructure
- 25 percent tax rebate in exportable local goods
- To encourage merger of financial institutions
- 50 percent exemption on registration of land to be used for industrial purpose
In an effort to lure investment in infrastructure, the budget has proposed 40 percent tax exemption in income earned from investment in the sectors such as roads, bridges, airports and tunnels besides simplifying the procedure involving the development of cable cars. Similarly, 25 percent tax rebate on export of goods produced using local raw materials, 50 percent exemption will be given to software development, data processing, cyber-café and digital mapping industries located within technology park, biotech park and information technology park.
The budget has also attempted to encourage the merger of banks, finance and insurance companies by introducing changes in provision of tax assets and liabilities as disposal after merger to make it non-taxable.
Arrangement has also been made in the budget to allow lump sum deduction in depreciation on the purchase of cash machine to encourage tax payers to issue bills and invoices through cash machines and fiscal printers to encourage transparency in transactions.
The budget has also removed 25 percent rate slab, out of the seven slabs of import duty and exempted 50 percent in land registration tax if the land is used for establishing or expanding the manufacturing industries giving direct employment to 300 or more Nepalis.
Similarly, the budget has proposed 30 percent exemption in land registration tax on lands transferring ownership to women in rural areas and arranged lump sum payment of vehicle tax at existing rates.
In an attempt to make revenue administration autonomous and effective, the budget has announced to present a bill to establish a Central Revenue Board in the Legislative-Parliament, effectively implement anti-money laundering activities and restructure Department of Revenue Investigation as Department of Revenue and Money Laundering Investigation with necessary resources.
The budget has also made it mandatory for the Nepal based authorized dealers of vehicles to publish maximum retail price of the vehicles in National dailies every four months.
Given the trend of defaulting revenue by casino operators, the budget has announced to fine as well as apply interests on outstanding due besides making a provision of compulsory renewal of casino license each year.
Vehicles to be more expensive
The budget 2010/11 has jacked up excise duty for four-wheelers and two-wheelers by 10 percentage points, making vehicles expensive. Auto delaers informed Republica that the hike in excise duty has exerted them serious pressure to raise prices of vehicles.
According to preliminary calculations, the government´s announcement to jack up excise rate to 60 percent from existing 50 percent has straight away raised cost for distributor by some 20 percent. Likewise, rise in two wheeler´s excise rate to 40 percent from 30 percent has also inflicted additional cost of some 16 percent on distributors.
With the change in duty, vehicles currently priced Rs 2 million could now be priced Rs 2.46 million. Likewise, motorbikes priced Rs 150,000 could go be priced as high as Rs 174,000.
Cash incentives for conference tourism
Government has allocated budget for Nepal Tourism Year 2011. Presenting the budget on Saturday, Finance Minister Surendra Pandey appealed the tourism entrepreneurs, private sectors, civil society and political parties to extend their support and show participation from their respective fields. Pandey said that the budget necessary for publicity through international media has already been delineated.
As an effort to encourage entrepreneurs to bring larger number of tourists, the government has decided to provide Rs 500,000 to the organizer of a meeting, seminar or any other program involving 100 foreign passport holders entering Nepal via air.
In the current fiscal year, the government will further develop cities like Janakpur, Pokhara, Lumbini as interdependent and complementary triangular tourist destinations.
Government has decided to develop the airport infrastructures of Pokhara, Lumbini and Janakpur making them capable of operating international flights. Similarly, the budget has also mentioned about upgrading Rumjhatar airport and giving continuity to the completion of detailed feasibility study of Nijagadh International Airport.
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