High-level commission advises reconstruction tax

- PRITHVI MAN SHRESTHA, Kathmandu
High-level commission advises reconstruction tax

May 19, 2015-

A High-Level Tax System Review Commission has urged the government to impose a “reconstruction tax” to raise money to rebuild the country after the devastating Great Earthquake.

In an interim report presented to Finance Minister Ram Sharan Mahat on Tuesday, the commission has recommended charging a reconstruction tax besides keeping large contributions from taxpayers outside the tax net, a Finance Ministry official said.

Commission Chairman Roop Khadka said that the panel had suggested raising more revenue from taxpayers and giving them certain relief in the challenging times following the tremors.

He didn’t specify what recommendations were made but said that imposing extra taxes and making donations to the relief effort tax deductible were usual international practices during the reconstruction period following great disasters.

Considering that the portion of non-filers (taxpayers not submitting tax returns) has been rising in recent years, the commission has suggested conducting regular follow-ups by the tax administration when registered taxpayers don’t submit details of their transactions.

Taxpayers are required to pay value added tax (VAT) within 25 day of the end of the previous month. “If they don’t pay it within that period, the tax administration should initially remind them by telephone or email and continue to follow it up by other methods,” said Khadka.

If the non-filers are companies that are not in existence, the commission has suggested maintaining a separate list to identify them if they surface somewhere else.

According to the Inland Revenue Department (IRD), there is a growing trend among registered taxpayers of not filing their tax returns. Among the 685,958 registered corporate income tax payers in the last fiscal year, 39.51 percent did not file their tax returns.

Likewise, 30.98 percent of the 133,178 firms registered under VAT did not file their tax returns, said the IRD. According to the IRD, the percentage of non-filers has grown in recent years as firms had been registered haphazardly in a bid to increase the number of registered taxpayers.

After the VAT system was introduced on November 16, 1997, the portion of non-fliers was not much. “It was targeted to keep the number of non-fliers at below 5 percent and it had remained below that level for a few years after VAT was introduced,” said Khadka who was also a key figure in the introduction of the VAT system.

According to the Finance Ministry, Khadka said that the government should not change the basic working guideline of the current tax system adopted under the first phase of reforms in the early 1990s, but that improvements were needed at the policy level and in the institutional working style during the second phase of reforms.

Khadka said that the commission had suggested taking measures to implement the tax system in its true spirit by correcting deviations.

According to the ministry, the commission has suggested to the government to take the private sector into confidence by assuring them that tax rates would not be changed frequently. It has also recommended measures to control the problem of under-invoicing which results in traders not giving bills to their customers. On the occasion, Finance Minister Ram Sharan Mahat said that the commission’s recommendation would be helpful for tax system reforms through the next fiscal year’s budget.

Published: 20-05-2015 07:59

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