Budget bids to up revenue

Industrialists, middle class anxious

BY MILAN MANI SHARMA

KATHMANDU, Sept 20 - The new budget of the CPN Maoist-led government announced Friday has landed the axe on the urban middleclass by introducing new taxes on basic services like health and education, among others. It has also delivered little by way ...

But he also caused anxiety for the private sector by demanding that they declare their property voluntarily within four months (by mid-February) or see those confiscated.

"People will also need to disclose their income while buying house, land and vehicles above certain limits," said Bhattarai, presenting the budget for 2008/09 in the Legislature-Parliament. He did not specify the limit, but added that the government would update the existing Property Tax Act 1990 to increase revenue.

"It (budget) is very confusing and has made us anxious." Kush Kumar Joshi, president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) reacted to the budget.

Reeling under pressure to realise more revenue to finance an inflated budget, Dr. Bhattarai introduced 5 percent Health Service Tax and Education Tax on fees charged by private health service providers and education institutions.

He also increased rental tax to 10 percent and introduced pollution tax of 50 paisa on every liter of petrol and diesel sold in Kathmandu Valley.

The new budget has also increased registration fee on land transactions by 0.5 percent in the Valley. The collection, says the budget, will be used to cultivate Bagmati Civilisation - a concept which has been pushed in the budget to improve the outlook of the Valley.

The government has also increased duty on vehicles, which present day professionals prefer to relate to productivity. Dr. Bhattarai justified the raise saying, there are too many vehicles on Kathmandu roads and traffic congestion has escalated.

As usual, he also raised import duty and excise on liquor, cigarette and other tobacco products.

In a bid to cheer up industrialists, Finance Minister Dr Bhattarai lowered import duty on raw materials. The budget has also reduced duty on palm oil, packing materials, soya bean and sunflower.

He also pledged 10 percent discount on income tax to industries permanently employing 500 or more Nepali nationals.

"Special service charge of 1.5 percent imposed on income tax has been scrapped. I believe this will lessen the burden on taxpayers and relieve them," said Dr Bhattarai.

The budget has also brought down duty on 131 items to zero, in order to comply with regional free trade agreements and international commitments. "However, excise duty on some of them has been raised to compensate revenue loss," it says.

Moreover, the government has proposed introduction of shift system to extend service to 24 hours at customs offices.

To promote rural savings, the budget has pledged 10 percent discount on tax imposed on interest income of savings up to 10,000 deposited in micro-finance institutions, rural development banks, postal saving bank and rural cooperatives, among others.

Apart from change in tax structure, the new budget has also announced changes in revenue policy. It has proposed constitution of a new Money Laundering Department within this fiscal year.

"A permanent Central Revenue Board will be formed to oversee revenue operations in a coordinated way," says the budget, which further states that a task force will also be formed to demarcate the extent of revenue collection for the centre and the local government.

In a major change, the new government has scrapped the existing fixed structure of revenue services and announced that it will interchange officials from postal as well as administration services with revenue officials whenever necessary.

It has also proposed establishment of 'Border Security and Revenue Leakage Control Patrol' posts and active flying squads to check revenue leakage.

Likewise, it has announced that import consignments from four major customs offices - Birgunj, Bhairahawa, Biratnagar and Mechi - will be allowed to move in sealed containers only. The new system will be put in place in six months, says the budget.