Half of Nepali taxpayers failed to file their tax returns in the last fiscal year 2019-20, and this group continued to remain substantially large amid the Covid-19 pandemic.

According to tax authorities, the non-filers owe both income tax and value added tax to the government, and they have been delaying paying taxes despite repeated extensions of the deadline.

In fiscal 2018-19, the percentage of non-filers was 48 percent, as per the Inland Revenue Department's Annual Report 2019-20.

The proportion of taxpayers failing to pay VAT in fiscal 2019-20 was 38.46 percent, a sharp increase from 25.1 percent in fiscal 2018-19.

“The main reason behind the rise in the number of non-filers of VAT is the uncomfortable situation brought about by the Covid-19 pandemic and the postponement of the due date to August 26,” says the report.

Mukti Pandey, deputy director general of the Inland Revenue Department, said that even though the proportion of non-filers showed an increase at the end of the last fiscal year, it came down slightly after the number of late payers was adjusted when the extended deadline of August 26 expired.

“But the proportion of non-filers is higher compared to fiscal 2018-19 even after the adjustment,” he said.

The government has extended the deadline several times and the latest extension was till August 26 since the lockdown was imposed on March 24. Tax officials and experts say that an increase in the number of non-filers is not good.

“A rise in the proportion of non-filers means an increase in the rate of non-compliance with tax laws,” said a former tax official who has now been transferred to another government agency. “Non-filers cover taxpayers who have an obligation to pay tax, and those who have not conducted any transaction or earned taxable income.”

He said that some taxpayers don’t submit tax details because of ignorance. “Some may be real defaulters,” he said. The government’s tax collection is affected if the number of defaulters rise.

In the last fiscal year, the government collected Rs224 billion in VAT and Rs197 billion in income tax, according to the annual report. The overall tax collection of the federal government stood at Rs793.78 billion.

Taxpayers are required to file tax returns and pay VAT within 25 days of the end of the taxation period. This means taxpayers who pay VAT on a monthly basis have to do so within 25 days of the end of each month.

Those who have to pay income tax periodically need to file their tax returns and pay taxes by mid-January, mid-April and mid-July.

With regard to Tax Deducted at Source (TDS), the deductor needs to send the amount to the government within 25 days of collection.