KATHMANDU, Aug 31: Finance Minister Yuba Raj Khatiwada on Friday said that the government was considering introducing inheritance or estate tax in a bid to widen parameter of revenues on wealth.
Speaking at a function organized by Nepal Chamber of Commerce in the capital, Minister Khatiwada said that his ministry, the Ministry of Finance, is exploring various options for inheritance tax although it has yet to reach to a decision on that matter.
“We are still in the discussion phase on the modality of inheritance tax. We haven't reached to a conclusion yet,” Khatiwada said, adding that the issue would be tabled at the to-be-formed Revenue Board.
Khatiwada said extensive discussions will be needed before introducing such tax.
Labeled one of the most unpopular taxes, inheritance tax is levied on property inherited from person who has died. Such tax rates are determined on the basis of various factors including the condition of the residence/property, total worth of the inheritance, and the beneficiary's relationship to the deceased. Several countries across the world including Britain and Japan have such tax. The tax is either imposed as duty on the estate of a deceased or as an inheritance tax on the inheritor.
Minister Khatiwada didn't go into the details but said that such tax had been necessary to boost the country's economy. He said that such tax would not make big differences for businesses.
The proposal for inheritance tax, which is being proposed at a time when the three tiers of government are being criticized for creating a 'tax terror' to meet their resource needs, is expected to face stiff resistance as many are unhappy with the misuse of government funds by officials in luxury vehicles, foreign junkets and paying perks to people's representatives.
As the country embarks on a journey to federalism, the three tiers of government are under immense pressure to arrange funds for their operations. Local and provincial governments have lately been imposing taxes arbitrarily to meet their funds needs.
Some local bodies have imposed taxes on vendors who sell light snacks on the road, on bicycle users and locals who sell their surplus farm produce and livestock. In some instances, the three tiers of government have imposed taxes without statutory consultations often forcing people to pay dual taxes.
Another key reason behind growing public anger is the government's tax policies that are aimed at appeasing the rich at the expense of the poor. For example in this year's budget, the government has exempted share brokers from tax liabilities on their earnings but increased tax for share buyers and sellers.