Government Prepares to Form High-Level Committee for Tax System Reform

In preparation for the upcoming fiscal year 2081/82, Finance Minister Dr. Prakash Sharan Mahat and the government are taking proactive steps to revamp the existing tax system. To this end, they are in the process of establishing a high-level committee tasked with conducting a comprehensive review and proposing improvements to the current taxation framework. The committee is expected to submit its findings by the next Magh.

This initiative to reform the tax system was initially introduced in the budget for the current financial year. It was explicitly mentioned that a high-level committee would be formed to scrutinize the existing tax system and provide recommendations for its enhancement. The government intends to base the budget for the next fiscal year on the insights and suggestions put forth by this committee.

Unlike previous practices of forming routine committees to offer budget-related suggestions, the government is creating a distinct high-level commission dedicated solely to taxation matters. The recommendations stemming from this specialized commission are poised to play a pivotal role in shaping the forthcoming budget.

In pursuit of a challenging goal, the government has set a target to increase tax collection by 40 percent in the current fiscal year 2080/81, compared to the revenue generated in the previous fiscal year 2079/80. To achieve this ambitious objective, the government has explored innovative avenues for taxation, albeit facing some criticism for the introduction of VAT in new areas.

The government emphasizes its commitment to modernizing the tax structure and broadening its scope beyond mere rate adjustments. In this context, the formation of a high-level committee is an essential step, aimed at addressing tax-related complaints, revising existing provisions, and tackling pertinent issues.

It's worth noting that a similar tax study was conducted a decade ago. Ten years prior, the Nepal government established a committee, the High Level Tax System Review Commission 2071, to delve into taxation matters. Led by tax expert Rup Khadka, the commission conducted an extensive examination of tax administration. The resulting report was comprehended by then Finance Minister Dr. Ram Sharan Mahat. Since that time, Nepal has transitioned into a federal system. Surprisingly, despite the government's receipt of recommendations, there has been no further study conducted to date concerning taxation-related matters.