Print Edition - 2015-05-08 | MONEY
Govt to miss revenue target post April 25
May 7, 2015-
The government will miss its revenue collection target for the current fiscal year as economic activities have largely come to a standstill since the Great Earthquake, the Finance Ministry said. It has been constantly meeting the goal since Jana Andolan II in 2006.
The collection target for this fiscal year has been set at Rs423 billion. The government had been scrambling to achieve its collection goal even before the quake struck. It had already encountered a deficit of around Rs2 billion as of mid-April, and the devastating tremor has only pushed the target further away.
It now seems impossible to meet the revenue collection target as business activities have not yet resumed, capital expenditure has continued to remain poor and imports of major revenue contributors like vehicles and petroleum may drop, said Laxman Aryal, revenue department chief at the Finance Ministry.
“We have not yet assessed revenue loss prospects, but there is a high possibility that the government will see a revenue shortfall of at least Rs15-20 billion,” he said. “How the flow of revenue has been affected can be gauged from the fact that the collection of the Department of Customs (DoC) has reached just 50 percent of its usual income as of Wednesday.”
According to him, the ministry has asked the Inland Revenue Department (IRD) and the DoC to submit revised estimates of revenue collection for this fiscal year. Many shops have not yet reopened.
The Tatopani Customs Office, a key inland trade route with China and one of the top 10 strategic customs offices, had been obstructed even before the earthquake. The Rasuwa Customs Office, another major point for trade with the northern neighbour, has also remained closed since the quake. As a result, revenue collection at both these points have dropped sharply.
“The collection of value added tax (VAT) and excise duty, which are based on the volume of transactions, has been heavily affected,” said Chudamani Sharma, director general at the IRD.
“Many business enterprises have also been hit by the tremor, and since earthquake damage is tax deductible, it will affect income tax collection.”
As per tax laws, business enterprises can report the damage they have suffered to the IRD within 30 days. The IRD has asked them to submit their reports of earthquake damage, according to Sharma.
Due to the exodus of foreign tourists from the country and massive cancellations of hotel bookings in the aftermath of the quake, the earnings of the tourism industry are expected to drop sharply contributing to a reduction in the revenue collection from the sector.
As the Kathmandu valley is the biggest contributor to the government’s revenue collection, the massive impact of the earthquake here and the subsequent mass outflow of people from the valley has affected business transactions whose impact will be seen in revenue collection, according to the government officials.
“Because of these factors, the IRD is likely to see a shortfall of at least Rs7-8 billion during this fiscal year,” said Sharma.
Similarly, the DoC thinks that it will be difficult to meet the revenue collection target. “As the Tatopani and Rasuwa customs offices have remained closed and the Tribhuvan International Airport Customs Office has been clearing only relief materials until recently, meeting the revenue target will be very difficult,” said Sishir Dhungana, director general at the DoC.
Published: 08-05-2015 09:31