'Tax waiver for startup' scheme ambiguous

Published On: June 19, 2019 04:30 AM NPT By: Nikeeta Gautam

KATHMANDU, June 19: Though entrepreneurs have appreciated the government's decision to give tax waiver to startups, they think that the scheme will not reach the targeted group due to lack of conceptual clarity.

On May 29, Finance Minister Yuba Raj Khatiwada had announced tax waiver for startups which were not yet in the tax ambit. The waiver, he announced, will remain in place till mid-January 2020 for the ones that use innovative idea, skills, and technology in their ventures.

As further details related to the scheme have not been conveyed to either the Inland Revenue Department (IRD) or the other stakeholders of the entrepreneurial ecosystem, experts see grey area in proper implementation of the scheme.

According to Yagya Dhungel, spokesperson of IRD, the government has not provided further details of the scheme that was brought for the welfare of startups. "Basically, we are providing time to innovative businesses to register themselves under the revenue department," he added.

However, the department is not even sure how exactly a startup is defined.

Meanwhile, Dinesh Bhattarai, joint secretary (Industrial and Investment Promotion Division) at the Ministry of Industry, Commerce and Supplies, said that the exemption scheme was brought for the promotion of startups.

"But the criteria have not been clearly conveyed to us. So, we will be providing exemption to the ones who come to us saying that they are innovative,” said Dhungel.

Entrepreneurs and academics observe that most of the startups, especially the early-stage entrepreneurs, might not benefit from the scheme because there is no clear and comprehensive communication about it.

Vidhan Rana, founding partner of Biruwa Advisors, a business and management consulting firm focusing on startups, said that there was no clarity in the government's announcement.

"The government's objective to introduce this scheme is to help the startups. However, any kind of consultation with the stakeholders connected to the startup ecosystem was not done before the announcement," he said.

Experts say that the government has brought the scheme without any conceptual clarity about 'startups'.

"When talking about criteria of identifying startups, two key words are essential: technology and scalability. Though the government has mentioned innovative businesses using technology, it has not mentioned scalability anywhere," said Narottam Aryal, executive director of King's College.

While the country sees rising number of young entrepreneurs every year, they complain of regulatory barriers that limit them in many areas.

"Focus should be on framing a comprehensive policy for startups rather than bringing short-term populist schemes," said Rana.

Aryal said it was now necessary to redefine the word 'startup'. "The government needs to come up with an integrated policy rather than making comments about the potential of startups and bringing vague schemes," he said.

A Startup Advisory Committee consisting of government representatives, entrepreneurs, and academics was formed in 2016 under former Minister for Industry, Commerce and Supplies Nabindra Raj Joshi. The committee had also prepared a draft policy in 2017, but the formulation of procedures had stalled after the government was changed.

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