Slowdown in economic activities despite a heavy decline in interest rate behind below par revenue collection: Experts
KATHMANDU, Nov 17: The government’s revenue collection in the first four months of the current fiscal year stood at a mere 22.77 percent of its annual target, mainly due to the inadequate amount in tax revenue caused by the economic slowdown in the country.
In recent days, banks and financial institutions have been reducing their interest rates successively citing excessive liquidity with them. Due to this reason, the interest rate on the government's internal borrowings has come down to four-year low at 3.95 percent. Similarly, the base interest rate of banks has fallen to 7.02 percent while the interest rate of fixed deposit has come down to as low as 5.53 percent per annum.
Despite the heavy fall in the interest rates, the banks’ private sector lending has increased at a snail’s pace. “The investment and economic activities have almost stagnated despite an ease in liquidity with banks,” said Finance Secretary Ram Prasad Ghimire.
Speaking at a program organized to mark the National Tax Day 2024, Ghimire said the government holds the responsibility to increase the tax collection along with boosting the economic activities. “There won’t be an issue of low tax collection if the country’s investment environment improves,” he said.
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The government has earmarked expenditure of Rs 1.860 trillion for the current fiscal year. To finance the annual expenditure, the government has aimed to collect revenue of Rs 1.419 trillion, out of which Rs 1.284 trillion has been attributed to the collection of taxes. However, the tax collection during mid-July and mid-November posted a dismal picture.
Gopi Krishna Koirala, deputy director of the Inland Revenue Department, said the government has aimed to collect 32 percent more revenue in the current fiscal year, compared to the amount collected in the last FY. “But only an increment of 15 percent has been achieved till date,” said Koirala, adding that the tax collection this year has also been affected by the devastating floods and landslides two months ago.
Finance Minister Bishnu Paudel however expressed his dissatisfaction with the functioning of tax administration. According to him, the poor performance has also resulted in the slow revenue collection. “The tax offices must improve their work efficiency during the odd hours of the economy to collect a notable size of tax revenue.”
Meanwhile, the private sector has demanded the need for reforms in tax-related laws and an improvement in the pattern of the government’s capital expenditure to increase collection of tax revenue. Kamlesh Agrawal, president of the Nepalese Chamber of Commerce, said there is no uniformity in defining tax-related issues at various government bodies, while the government is relying on four-decade old tax laws.
Birendra Pandey, vice-president of the Confederation of Nepalese Industries, stressed the need for increasing capital expenditure. “If the government increases capital expenditure, the revenue collection will eventually increase,” Pandey said.
16 persons and business firms honored as highest tax payers
The government honored 16 individuals and business firms as the highest tax payers in different categories.
Nepal Telecom bagged the honor of highest tax payer among public enterprises. Likewise, Dabur Nepal received recognition for the highest income tax payer among the exporters.
In banks and financial institutions, Nabil Bank topped as the taxpayers in fiscal year 2023/24. Bhatbhateni Super Market and Department Store led the group of commodity traders.
Raj Bahadur Shah received recognition as the highest contributor in personal income tax. Finance Minister Bishnu Paudel honored the awardees amid a special program organized by the Inland Revenue Department to mark the National Tax Day 2024 on Saturday.
