A High-Level Tax System Reform Suggestion Committee has submitted its final report to the government.The Committee handed over the report to Finance Minister Barsaman Pun on Sunday. The committee took almost six months to prepare the 258-page report with 140 schedules. The report states that implementation of the suggestions included in the report will help increase revenue mobilisation, create new jobs and improve public finances, according to the Ministry of Finance. The report mentions suggestions on various economic issues, including tax laws, tax rates, tax administration and revenue structure.
On September 15, 2023, the Council of Ministers had formed a four-member Committee under the leadership of former minister and former secretary Bidyadhar Mallik.
Former secretary Laxman Aryal, professor of the Economics Department of Tribhuvan University Dr. Ramprasad Gyawanli and former administrator and customs expert Ram Prasad Dahal were members of the Committee.
According to the report, the world economy has been affected by the interruptions of the global supply chain due to the COVID-19 pandemic and the Russia-Ukraine war, resulting in an imbalance that has also been created in the Nepali economy.
But recently, the overall economy is gradually returning to the rhythm of improvement in terms of economic growth and inflation, according to the report.
“Due to some contractionary policies taken in the past, the expected improvement in economic growth rate, job creation and public finance mobilisation has not been achieved,” the report read. “Due to the lack of effective demand and improvement in the investment environment, economic growth has slowed down.”
Presenting the report, Coordinator of the Committee Mallik expressed his belief that the report would prove to be a milestone for the country’s tax administration, economic growth and development of the overall economy.
He said that the report contains suggestions to be implemented in the formulation of revenue mobilisation policy for at least next 5 to 20 years. According to the report, the main reason behind the contraction in economic growth was the inability to improve the revenue collection capacity.
The report suggests that there is a need for a separate agency to look after the risk weight of taxation and there is a need to change the existing structure of the Revenue Tribunal. Stating that exemption was also a reason for the lack of revenue growth in the last decade, it has suggested that the policy to increase the scope of taxes and reducing tax rates instead of tax exemption is preferable.
Accepting the report, Finance Minister Pun thanked all the officials of the committee for preparing a comprehensive report and said that the government was committed to implement it.
He said that the report had come at a time when it was difficult to meet recurrent expenditure and to attract investors from both home and abroad.
“A good report has come at a time when I thought I would do something in preparation for the budget for the next fiscal year 2024/25,” Minister Pun said. “I believe the report will help the government’s economic reform efforts.” The committee had previously submitted a preliminary report to the then Finance Minister Dr. Prakash Sharan Mahat on October 18 and final report on February 13.Mahesh Baral, Joint Secretary at the Ministry of Finance and Member Secretary of the Committee, said that the final report had been prepared with some improvements compared to those two reports.
