Tax, customs offices miss revenue targets

- POST REPORT, Kathmandu
Tax, customs offices miss revenue targets

Feb 28, 2015-

Most of subordinate offices of the Inland Revenue Department (IRD) and the Department of Customs (DoC) missed revenue targets for the first half of the fiscal year, which the Finance Ministry has termed a key challenge in revenue management.

The overall revenue collection, however, surpassed the target for the review period, thanks to better collection of tax and registration fees. The collection stood at Rs 190.52 billion against the target of Rs 185.48.

However, the DoC has said most of those missing the targets are small customs offices that contribute just 3-5 percent to DoC’s collection, so it would not make a big difference.

Among the big customs offices missing the targets are Tatopani, Mechi and Biratnagar customs offices, according to DoC. However, Tatopani witnessed big shortfall thanks to the disruption of transportation on the Araniko Highway as a result of landslide at Jure in Sindhupalchok. “The overall revenue collection under the DoC is on track,” said Sishir Dhungana, director general at DoC.

The government also missed the collection targets under four major tax heads—customs duty, value added tax (VAT), excise duty and income tax, according to the Mid-Term Review report of the budget released by Finance Ministry recently. In fact, VAT and excise duty collection decreased in the first six months compared to last year’s figures.

The report attributed the failure to achieve targets under the four tax heads to a large number of non-filers (those who don’t submit tax details to tax authorities) under VAT and income tax.

Among 685,958 registered corporate income tax payers in last fiscal year, 39.51 percent did not file tax returns, according to IRD. And, 30.98 percent of 133,178 firms registered under VAT did not make the filing.

The IRD said the percentage of non-filers has grown in recent years due to haphazard registration of firms in a bid to increase the number of registered taxpayers.

Despite the government’s high priority, figures over the last eight years show a decreasing trend of the contribution of VAT in the overall revenue collection in the first half. According the report, VAT’s contribution in first-half collection in 2007-08 was 37.17 percent, which has now came down to 31.92 percent.

The ministry said it was due to sluggish participation of taxpayers in VAT, non-filing of tax details and under-valuation.

Officials said the government’s failure to speed-up capital expenditure also hit VAT collection. According to the Nepal Rastra Bank, the government has nearly Rs 100 billion unspent in its treasury.

As far as the customs duty is concerned, its contribution to the overall revenue collection came down to 20.83 percent in the first half this year from 24.1 percent a year ago.

The main reason behind the reduced contribution of customs duty are reduction in customs rates on imported goods as per Nepal’s international commitment and most of the exportable products not being levied any duty, the report states. Despite the cut in customs rates, the customs duty collection target was met due to a massive surge in imports in recent years. According to DoC chief Dhungana, Nepal imposes customs duty in the range of 5-15 percent on half of the imported goods as Nepal has been lowering the duty. “This has made it tough for the offices to collect more revenue, and the recent drop in the import of petroleum products has also played a role,” he said.

As far as excise duty is concerned, its contribution to the overall revenue has fluctuated over the last eight years. According to the report, the contribution increased to 14.39 percent this year from 12.34 percent eight years ago. But the figure had reached as high as 16.17 percent in 2010-11. Excise duty is imposed on products such as tobacco and liquor.

The contribution of income tax has also been declining over the last three years, although it had risen in four of the previous five years. Income tax contributed 22.45 percent to the government’s revenue in the first half, compared to 20.91 percent in 2007-08. But the contribution was as high as 25.53 percent in 2012-13.

There has been a massive surge in the collection of land and property registration fees this year, with the government collecting double the targeted amount.

Asian Development Bank has also stated the massive rise in the collection of registration fee is a result of a rebound in the real estate sector in its latest Macro-Economic Update report.

“Lending for personal housing is picking up as the liquidity surplus is benefiting borrowers in terms of low lending rates,” the ADB report says.

Published: 01-03-2015 09:03

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