Private sector presents budget wish list to Finance MinistryNepal’s private sector has long been complaining that the high interest rates charged by banks had increased their production costs. Banks have been reluctant to revise interest rates citing a shortage of loanable funds.
The private sector asked the government to introduce policies to address the issue of high interest rates, and slash the tax rate in the production business through the budget statement for the next fiscal year. Trade associations including the Federation of Nepalese Chambers of Commerce and Industry, Confederation of Nepalese Industries, Nepal Chamber of Commerce and Nepal Foreign Trade Association submitted their wish list to the Finance Ministry on Friday, saying it would attract more investment. The Finance Ministry is currently preparing the government’s annual budget statement which will be presented to Parliament on May 29.
Nepal’s private sector has long been complaining that the high interest rates charged by banks had increased their production costs. Banks have been reluctant to revise interest rates citing a shortage of loanable funds. Nepal Rastra Bank has fixed the maximum spread rate—the difference between the interest rate banks pay on deposits and the interest rate they charge on loans—at 4.75 percent; but banks have been found to be exceeding the limit.
The private sector also pointed to the slow capital expenditure, urging the government to improve its spending capacity to ease the liquidity position in the market. The trade associations asked the government to simplify the process of providing refinancing facility to production businesses, reduce insurance premiums and provide subsidies on land tax and registration fees for production plants to reduce production costs. They also urged the government to reduce the corporate tax by 5 percent. Currently, the government charges corporate tax at the rate of 20-30 percent. Another demand they put forth is a revision of the income tax slab.
The government claimed that it had resolved the issue of haphazard taxation by sub-national governments, but the private sector said they were still paying taxes to various levels while trading goods. They asked the government to establish a central revenue board and enforce a code of conduct in the tax system to resolve taxation issues. The private sector also requested the government to come up with measures to reduce the trading costs of imports and exports. They urged the government to provide a discount on payments made for imports by bank draft and telegraphic transfer. The government currently provides subsidies on payments made by letter of credit.
Revising the existing threshold to obtain bonded warehouse facility is another demand made by the private sector. The government only provides the facility to firms which export 50 percent of their production. The entrepreneurs urged the government to provide the facility to firms exporting goods valued at more than Rs20 million. They also asked the government to operationalise the integrated check posts at all customs points, and provide laboratory, quarantine and banking services at the customs offices to make trading easier.
According to them, establishing an auction house for farm products to reduce the role of middlemen, providing soil testing facilities, facilitating small irrigation projects and using information technology could help improve agricultural productivity.