The government has jacked up its revenue target for the next fiscal year by more than Rs50 billion against the advice of the Revenue Advisory Committee.

The advisory committee, which is coordinated by a joint secretary of the Finance Ministry, had projected revenues to reach Rs515.97 billion and Rs507.88 billion under the linear trend model and buoyancy method respectively.

However, the budget statement has set a goal of collecting Rs565.89 billion in revenues in fiscal 2016-17.

Under the linear trend, the projected revenue is calculated by considering past collection trends. The buoyancy model takes into account past collection patterns and changes in the tax base.  

“A realistic target would be Rs530 to Rs540 billion,” said a source at the Finance Ministry. “Collecting the targeted amount will be challenging if economic activities continue to remain sluggish and administrative reforms remain blocked.”

According to Finance Ministry officials, the revenue collection target had to be hiked after the government produced a budget of Rs1.04 trillion, far exceeding the ceiling fixed by the Resource Committee, which is headed by the vice-chairman of the National Planning Commission.

However, Govinda Nepal, chief economic advisor to the Finance Ministry, said the revenue target set by the budget was achievable considering the collection pattern of the current fiscal year.

“Despite an embargo by India that lasted four and a half months, revenue collection is not expected to be far off the target this fiscal year,” he said. “We are expecting a normal situation next year, which means meeting the revenue target will not be an enormous task.”

The revenue target for this year is Rs475 billion, and the government expects to collect Rs467 billion as collections swelled in the 10th month. According to the ministry, revenues totalled Rs60 billion during the one-month period from mid-April to mid-May, far surpassing the target of Rs34 billion as imports surged and economic activities expanded. Joint Secretary Laxman Aryal, who heads the Revenue Advisory Committee, said that the revenue target set by the budget could be achieved as increased economic activities triggered by the ‘bigger budget’ would generate more revenue.

“The government has also imposed an infrastructure tax on petroleum products which means additional revenue that was not envisioned when the committee prepared its report,” he said.

Roop Khadka, tax expert and member of the committee, said that administrative reform and better economic performance were needed to achieve the revenue target.