Value added tax: Pvt sector asks govt to increase threshold

KATHMANDU, JUL 31 -

The private sector, which has long been demanding removal of transactions threshold to implement the Value Added Tax (VAT), has now sought an increase threshold from current Rs 2 million.

After the government’s refusal to entertain their demand for removal of threshold system, it demanded the increase in threshold that would put medium-sized businesses outside the VAT net.

“Threshold should be increased to Rs 10 million,” said Suresh Basnet, president of Nepal Chambers of Commerce (NCC). “Current threshold has become irrelevant as it was introduced 15 years ago.”

He said that after the government refused to entertain the demand for removing threshold at all, they had to seek hike in threshold.

Speaking at an interaction orgainsed by Inland Revenue Department (IRD) on Monday, the representatives of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI) echoed NCC president, calling for hike in threshold as well as introduction of multiple VAT rates.

FNCCI Vice-president Pashupati Murarka and CNI Vice-president Birendra Kumar Shanghai spoke in favour of hiking the VAT threshold and multiple VAT rate. “Indian good manufacturers have to pay only 5 percent VAT in some products, while we are compelled to pay 13 percent in all,” complained Sanghai. “How can we compete with the Indian products in such situation?”

However Finance Secretary Krishna Hari Baskota remarked that it was unreasonable for traders to ask the government to increase threshold of the VAT. “As the businessmen are just the government entrusted VAT collectors, they should not talk about expanding VAT threshold,” Baskota said, addressing the inaugural session entitled “Seminar on Annual Review and Formation of Strategic Plan” on Monday.

Brick kilns have also been avoiding the government’s call to come under the net despite their transactions of millions of rupees in a year, asking the government to increase threshold.

Baskota also said that the growing trend of giving tax incentives to the private sector is gradually being problematic as the government cannot fulfill the demands of the entire private sector.

According to him, the government had provided a tax incentive worth Rs 4.7 billion to the private sector including, Rs 1.7 billion for ghee and edible products.

Private sector representatives also stressed on the need for creating tax related awareness to avoid confrontation between the tax administration and taxpayers that witnessed in some places including Narayanghat.

Asking the government to make favourable environment for clearing tax liabilities to the traders and industrialists, Murarka said, “By creating massive tax awareness and also putting in view of industrialists’, the government can boast up the taxpayers’ morale.”

Presenting a paper, IRD Director General Tanka Mani Sharma said that the department was undertaking reforms in tax administration in a bid to introduce a proactive tax mechanism. He also said that the IRD would soon come up with sort-term and mid-term tax strategies. “With these reform works, our plan is to increase revenue contribution in GDP by 20 percent within 5 years.”

Source: The Kathmandu Post