Firms say political unrest No 1 problem

KATHMANDU, APR 18 -

Nepali businesses have identified political instability, power supply and access to finance as the three top problems ahead of labour unrest. International Finance Corporation’s (IFC) Tax Compliance Cost Survey Report says 71 percent of the businesses considered political instability as a severe problem followed by electricity (56.25 percent) and access to finance (30.69 percent).

The Business Enterprises Survey carried out by the World Bank (WB) in 2009 had also shown similar results about business environment constraints. The WB survey had also listed political instability and electricity as the top two hassles making life hard for businesses.

The IFC report shows that smaller businesses have more problems regarding access to finance in comparison to the larger ones. “It was observed that 32.68 percent of the firms having revenues below Rs 2 million considered it a problem as against 3.78 percent firms having revenues over Rs 250 million,” says the report. IFC had carried out the survey covering 990 firms, from small to large taxpayers, belonging to the manufacturing, trade and service sectors across the country.

Interestingly, corruption was considered a moderate to a severe problem by more than 62 percent of the businesses. According to the report, 75 percent of the firms mentioned that neither business licensing, permits nor inspections created serious problems for their businesses. “Corruption cited as a major problem by 62 percent of the respondents in itself may suggest the implicit reason why licensing, permits and inspection was not a serious problem,” states the report. However, a majority of the firms agreed that businesses would be willing to pay more tax if corruption was not prevalent.

Even though the report shows that Nepali businesses generally overstate the actual expenditure in their tax returns by 40 percent and declare only 80 percent of their annual sales for tax purposes, a majority of the respondents in the survey disagreed with this statement: “It is justifiable if a business under-reports its income in order to pay less tax.”

Despite firms, especially the smaller ones, having to bear substantial tax compliance costs, only a smaller segment thinks tax rates and tax administration are a problem. “Regarding tax rates and tax administration, only around 15 percent considered it to be a major to a severe problem,” states the report. 

Source: Kantipur