FinMin says govt can still raise taxesThe Parliament’s rejection of the Finance Bill—which makes necessary amendments to tax laws—has raised question of whether the government can raise taxes.
The Parliament’s rejection of the Finance Bill—which makes necessary amendments to tax laws—has raised question of whether the government can raise taxes.
Experts have expressed different views—some supporting the government’s right to collect taxes, while others disagreeing. However, the Finance Ministry, which is responsible for collecting taxes, is firm that the non-endorsement of the bill does not bar the government from raising taxes as the Periodic Tax Recovery Act has provided a firm basis for raising taxes.
The Act has allowed the government to raise taxes by publishing a notified in the Nepal Gazette until six months from the date of the publication. The government had published the notice on May 28, when the budget and the Finance Bill was presented at the parliament.
The Act says “if the government thinks that any Act on levying, increasing custom duty or excise duty or any other tax has to be promulgated and that it is expedient to levy or increase such custom duty or excise duty or any other tax immediately for public interest, Nepal government may, by a notified order, levy or increase such duty or tax”.
A meeting of senior ministry officials concluded the same on Sunday and decided to send a uniform message on the issue, according to the officials. The government collected taxes based on the rates fixed in the Finance Act on Saturday and Sunday. “On Saturday, customs offices collected revenues of Rs240 million,” said a ministry official.
“The government has got the right to raise taxes based on the Act passed by the Parliament,” said another ministry official. “As there is no provision of denying the government from collecting taxes even if the Finance Bill fails, we believe the government has every right to collect taxes.”
According to the Act, a notified order shall not commence as law only under three conditions. First, if the contents of the notified orders become law and come into force, whether being amended or not. Usually, the endorsement of the Finance Bill by the Parliament supersedes the notified order. Second, if the government directs by another notification orders published in the Nepal Gazette that the previous order shall not apply as law. And third, the notification ceases to be law immediately after expiration of six months from the date of its publication in the Nepal Gazette if neither new law supersedes it nor another notice terminates this notice.
It means the Act has given the government the right to collect revenues until November 30. Ministry officials believe there will be a new law enabling the government to collect taxes after November 30.
The Act has also made two provisions, under which the government has to return the collected taxes if the government announces through another notification in Nepal Gazette that the existing notification orders do not apply as law. And, if a law supersedes the notification and has provision of charging lower tax rate compared to the notified order, any over plus sum collected shall be returned.
If the tax rate maintained by the law is higher than what the notification has maintained, the tax shall be collected as per the new rate only from the date of the commencement of the law.
Meanwhile, the non-endorsement of the Loan and Guarantee Act will prevent the government to raise foreign loans. Through the bill, the government had sought to increase the maximum limit of foreign loans to Rs700 billion. The country’s outstanding foreign loan stands at Rs383 billion.
The government aims to repay Rs37 billion this fiscal year. Last year’s Loan and Guarantee Act has allowed the government to take foreign loans of up to Rs500 billion. So there is still space for raising Rs154 billion, according to the ministry. But the government has planned to raise Rs195.72 billion in foreign loans this fiscal year.
“As all the planned loans have historically been not realised, it may be the same this year. So it is not necessary be too much worried about it,” said Krishna Devkota, joint secretary at the ministry. But raising internal loans will be difficult in the absence of the bill on Raising Internal Loan which was also not endorsed by the Parliament.
As internal loans are not required to be raised immediately, officials believe a new arrangement will be in place when the loans are needed. The government aims to collect Rs111 billion in domestic borrowing this fiscal year.