In the first four months of the current fiscal year the government collected revenue worth Rs 323 billion, which makes up 22.77 percent of the annual target. The target set by the government for this period was Rs 368 billion. While there are eight more months for the Inland Revenue Department to tighten the screws to collect revenue to meet the annual target of Rs 1.284 trillion, it looks almost certain that the actual collection will clearly fall short of the ambitious budgetary projection, as it did in the previous years. This suggests either the revenues target is set arbitrarily, or there are serious flaws to look into and address them. The Ministry of Finance and its departments responsible for revenues collection must acknowledge the fact that meeting the target is entirely dependent on the investment climate. The private sector is the backbone of the economy and serves as the engine of growth, but it does not have a favorable investment climate. Investors are not ready to borrow money from banks and financial institutions and invest in business. As a result, in recent months, banks and financial institutions have been reducing the interest rates citing excessive liquidity but they have been unable to attract the borrowers. The central bank has had to step in and mop up the excessive liquidity almost every month. The investment and economic activities have almost stagnated despite an ease in the liquidity and resultant fall in the interest rates on banks' private sector lending.
While the revenues target should be met, the government cannot afford to stay over-focused on achieving a target which is most likely to be missed anyway – going by the track record and the past history. It is important that the private sector comes forward and secures loans. A low interest rate may be a necessary condition for potential investors to borrow money from banks but this alone is certainly not enough. Potential investors need to feel secure that their business will sustain and return on investment is, in a way, guaranteed. It is high time we pushed through massive reforms in our fiscal and other relevant policies, addressing the key demands and concerns expressed by the Nepali business community. Or else, it will only be business as usual. Nepal Telecom will continue to go down in history as the largest tax payer and there will be a handful of businesses – the "usual suspects" – will occupy the top spots as taxpayers.
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Nepal adopted a free market economy following the restoration of democracy in 1990. Had the market forces been able to play freely and had the government of the day been able to ensure a fair investment climate and a level playing field for all players, we would have had different stories to tell. At a time the government is struggling to collect targeted revenue while the country has embarked for the liberalized economy, it is an irony that a state-owned enterprise like Nepal Telecom occupies the place of the biggest taxpayer body.
