Finance minister shows bleak revenue situation as court halts revenue collectionGovernment fears it will be unable to meet liabilities such as salary, pension and social security allowance.
Finance Minister Yubaraj Khatiwada said on Sunday that the government’s current revenue collection was insufficient even to meet the compulsory liabilities of the government as the measures taken to prevent the spread of Covid-19 pandemic have badly affected revenue collection.
The government enforced a nationwide lockdown on March 24, closing industries, businesses, suspending ground and air travel, which badly affected the government’s revenue collection.
Although the government on Wednesday decided to relax the restrictions on conducting most of the economic activities, some sectors including public transport, cinema halls and shopping malls continue to remain banned for the time being. On the other hand, global supply chain disruptions affected imports, hitting tax revenue on imported goods.
“The situation of revenue is not good, which is the reality. There is no situation of the daily revenue collection sustaining the government’s daily expenditures,” said Minister Khatiwada, responding to lawmakers’ questions on the financial bill at the House of Representatives on Sunday.
“We spend around Rs40 billion a month to meet basic liabilities. But we have been collecting only around Rs 15 billion a month from the customs and a few billion rupees from other internal revenues,” he said.
The salary for government workers, pensions for retired employees, social security allowance for the elderly and disadvantaged groups, and payments to be made for internal and external loans are among the compulsory liabilities.
Amid a shortage of resources, the government has decided to bring some funds, created to serve specific purposes, to the government revenue account in order to bridge the resource gap.
“Many such funds have remained unused and they have been brought to the government’s revenue account on condition that the government will provide equivalent funding when required to carry out a specific job for which those funds were created,” said Khatiwada. “It is not good that the resources in such funds are deposited to fixed accounts in banks and the government has to take internal loans.”
While presenting the budget on May 28, Khatiwada said the government would be able to collect a revenue of Rs827 billion, just 74.4 percent of the target, in the current fiscal year.
But the government is pressed even to meet the revised estimate of revenue collection after the Supreme Court on Thursday ordered that taxpayers be given at least a month to pay their dues after the lockdown is lifted completely.
On June 3, the government extended the deadline for the third time to pay value added tax, excise duty, tax deducted at source (TDS) under income tax, education service tax, telephone ownership fee, and telecommunication service fee by June 21 and income tax by June 28.
Stating that the court’s interim order could render the government unable to meet its compulsory liabilities, the Finance Ministry on Friday registered an application at the top court demanding that its Thursday order be vacated. If the Supreme Court fails to vacate the ruling, the government will not be in a position to collect taxes in the current fiscal year as the lockdown has yet to be completely lifted.
“We are currently facing a revenue deficit of around Rs300 billion,” said Yagya Dhungel, chief of the revenue division at the Finance Ministry. “There are limited resources in the government’s treasury. If the court order is implemented, the government will be in no position to pay government employees, contractors and suppliers, among others.”
The Financial Comptroller General Office, which maintains a record of the income and expenditures of the government, also says that the treasury is not in a good shape right now.
“I think we will be able to pay salaries until this fiscal year,” said Gopinath Mainali, secretary at the office.
“If the situation does not improve, it will be difficult to pay government employees and to send the first instalment of the budget allocated to the provincial and local governments in mid-August in the next fiscal year’s budget.”
However, Minister Khatiwada showed some optimism that the situation would improve.
“After the lockdown is relaxed, internal trade is expected to grow gradually and imports are expected to return to normal situations,” he said.
He said the government was in favour of allowing business activities by addressing the risk of Covid-19 contagion.