Taxpayers whose annual transactions fall short of the revised value added tax (VAT) threshold face the cancellation of their registration. The Inland Revenue Department (IRD) said the move was intended to keep only “quality” taxpayers within the VAT purview and streamline administration.

The government has hiked the minimum limit to Rs5 million from Rs2 million through the budget for the current fiscal year, and companies with a turnover below that level do not have to register for or pay VAT. The IRD has prepared a separate working procedure to scrap the registration of taxpayers. As of the last fiscal year, there were 153,850 firms registered for VAT, according to the IRD.

Likewise, the IRD has said it will urge firms that have been inactive or have not filed tax returns for a long time to pull out of VAT.

IRD Director General Chudamani Sharma said that the move was guided by reducing the tax compliance cost for taxpayers and reducing the administrative workload of tax offices. “It will take at least a year for the exit where those having transactions below the threshold will voluntarily exit or the IRD will scrap their registration if their transactions do not grow above the threshold.”

According to the tax authority, the number of taxpayers not filing tax returns or not submitting details in credit (business in loss) has grown, and the IRD wants to reduce their number. The number of such non-filers at the Inland Revenue Office (IRO) in Kathmandu 1, 2 and 3 will be brought down to less than 1 percent, and those at tax offices elsewhere in the country will be cut to below 15 percent during the current fiscal year, according to the IRD.

Currently, the number of non-filers under the Kathmandu IROs is 2 percent and those under IROs elsewhere in the country is 24 percent, according to the IRD.

The department said taxpayers would be required to file their tax details on a monthly basis from mid-December. Currently, they have to do so every four months.

The IRD said that it would focus on increasing the proportion of tax collection under tax deduction at source (TDS) within income tax. It aims to increase it to 30 percent from the current 25 percent, according to the Lalitpur Declaration issued at the end of the management workshop held from August 13-14.

Likewise, the tax authority will make it mandatory for government agencies to obtain permanent account numbers (PAN), and the TDS paid by them will be collected online, the Lalitpur Declaration said. It will also computerize the details of taxpayers registered under education service charge and heath service tax. It will speed up the collection of outstanding taxes by maintaining records of those who owe more than Rs1 million in back taxes.