What I think of the budget 2073-74, Nepal.

Well, the Budget was decleared after a long long time on acurate time.

Other wise we have seen in almost all the past years,

That the budget was decleared only after the start of financial year.

It let to lot of problems in all the past years.

We would not be able to decide the new policies,

We would not be able to act for 2-3 months after the new budget just because, it came

After the financial year started.

So, this year,

We get the budget 45 days before the beginning of the financial year.

So how is it ??

Well,

When we used to do MBA, there were lot of people who would faff around.

They would not talk context, but kill all the time,

And the listeners would rate them great.

This is how, the new budget is.. !!

Government has just faffed !!

Nothing else.

Recently, I was in touch with a hospital to gift a dialysis machine.

Got to get the machine in Rs 10 lakhs.

The same machine was procured from the same hospital through tender in Rs 14 lakhs.

So, this is what is wrong with the budget.. !

They have come up with lot of projects, and studies,

Which will be repeated every year from now on..

More new declarations will come up in the next budget, or by the new government. .

The budget has increased the basic scales of govt employees, but I guess,

They already are earning more of black money, than the white money.

And the habit of having black money wont change any thing, even if you double the white money in one go..

The budget has given allotments to lot of fields, but they will only be spent in

Over tendering, or probably no tendering,

Because the competitiveness of the govt employees is actually very very bad, what ever you say.

They will destroy the public money..

So, what will this lead to ??

Lot of inflation as always.. !

What should they have done.. ?

First things first..

Only concentrate on 1 year activities..

Declearing 2 or 5 years plan on a budget is a useless thing.

Existing, roads, hospitals, projects need a massive ramp-up, and they are declearing

More projects..

We need massive revamp in tax collection system..

Nothing changed..

Lot of things can be done, but .. There is no will to do.. !

Anyways..

Employees are being un-taxed,

Only the customs tax is being concentrated.

What should we do ??

Don’t know, with this political setup, and administrative setup, I expect NULL , yes NULL improvement.. ! Only God can help Nepal !

Taxation in Nepal, putting NCELL into context.

There is a lot of Hue & Cry on taxation in Nepal these days, all thanks to NCELL.

But why has this issued come up, and what can we do, to prevent the same, is a big question no one can answer for now.

Let me give it a try. Also, please try to understand.. that all the logic in the article is purely based on the basis of experience and thought rather than any fact.

If you study the taxation in Nepal, we are a Tax Heaven country. No we are not Panama or Virgin Islands as tax heaven would mean.. but we are a country which collects a lot and lot of taxes.

To put in context how much taxes,
We buy a 4 lakh NRS Car of India, at Rs 10 lakhs.
We pay more taxes per litre on petrol, diesel, than we pay to India per litre.
We pay huge taxes on every import.

All these taxes we are talking about is Indirect Tax.

Indirect taxes, are Nepal’s best source of income.
But are we collecting more or less as per the potential we have ?

Any tax official will say, we are generating, more or less, good amount of taxes.

But let me be very clear. We are generating only 30-40% of what we actually can.
Why ?

There is a parallel economy in Nepal - India, and Nepal - China.. I am saying parallel economy, for only these two countries, because they should consist of about 80% of countries total trade. So, what do i mean by parallel economy. If Nepal Bank is sending Rs 100 to India, using Banking channel, same amount of INR is being sent in India through Nepal, without any record on Books.
So, what is this Extra Rs 100.
You are right, its all Black Money.
But, is it black money ?? Black money is only supposed to be with Big people, and Big companies ?? How can a minor Rs 100 figure be Black Money.
This is what is a basic flaw in the understanding of people, that our custom and tax officers have created in Nepal.
But why have they created so ??
Why would a tax officer know it all and would not be able to do anything ??
Answer is pretty simple, its because of their own black money.
So, how is this parallel economy running.
Its all because of Under-valuation on value of goods declared at customs, and sending the money of those goods via Hundi ( Hawala ).

Seems, very simple to tell, But how do we control this..

Its very simple too.
Reduce Tax Rates.

Nepal being a state with a lot of import duty, thinks that they are doing very good at generating a lot of taxes from the entry point itself.
But with this, we are letting the same amount of Parallel economy to run, which is more or less equal to the size of our GDP.
All this we are doing to save ourselves from the Direct Taxes.
Now, what is this Direct tax, how do we put it in context to NCELL, and what can we achieve.

What I believe on Ncell is..
First few basics..
Ncell started with Say Rs 1 lakh, and now, the company is being valued at say Rs 100 lakhs.
The company selling it at premium of Rs 99 lakh is supposed to pay 25% capital gain tax.

It is so easy to understand.
But what happened which led to such controversy in this matter.

NCELL is owned by A company is some tax heaven country ( Tax heaven is a country , where you don't need to pay any capital gain tax, you only pay a yearly fixed tax )

B company in some other tax heaven owns A. Now C company, buys shares of B company, and indirectly becomes owner of A.
All this is happening in Tax heaven country.

Nepal has NCELL, which has 20% ownership with some Nepalese, who already pays the capital gain taxes, as he sold to some other person.

But, what about A, or B or C ?? they are in Tax heaven countries, and using the same privilege to save themselves.

But, how could they take such a step, without realising that, a Hue and cry will be in Nepal all over, once the matter is known to public ??

Probably they knew, so they filed for a Pre-Ruling in Nepal.

As far as i believe, Nepal Tax authority, gave the ruling, that there would be No Taxes on 80% share being transferred.
NCELL owner, B used this pre-ruling, to sell.

Now, when the whole matter comes up, Tax authority Cancelled the pre-ruling, and started asking tax from company B.

Why did it start to ask ??

The answer is pretty simple. Some very senior and good leaders of country publicly took the issue. One of them is country’s ex-Chief Secretary.

Matter had to become Hot-Cake, and every senior Corrospondent, tax authority, came up, and told we will collect taxes.

But, can we really do the same.

Just to put the matter more in context.

We are a country with very very poor Capital Taxes rules.

Why i say very poor capital tax is because,

we don't have a compulsory PAN Number system.
means, what a person earns, is not paying any taxes ( Direct Tax ),
there are rules, there are provisions, but then, there is no one to check
the same is the story with corporate companies, and private companies as well as public companies in Nepal.
Public Companies ?? Well they don't pay coz, they are heavily corrupt ridden, and are always in losses ..
Pvt Companies ?? For small players.. They rather ask , why do we need to pay tax ?? We already have our parallel economy.
Pvt Companies ?? For Big players .. they rather say.. who will check that i pay or not.. i cook my books.. no one will know.. … I will pay sufficiently to the person who comes to check, rather than to the government.
So, who remains ??
None.. As Direct taxes are very very poorly collected in our country.
But why is this happening.
because there is no legal authority to check or audit the tax officers ??
But hey !! We have Office of Auditor General , Nepal, which is auditors of auditor ?? Why would tax officers not be checking the books well ??
Oh, forgot to tell this.. Tax officers take shares for Auditor Generals also.. !! Now who will check ??

Forget NCELL, nothing is happening.. we will keep crying.. !! and then forget.. !

More than Catching the NCELL authority, our public should catch our own authority, right from Auditor Generals, to tax officers, to custom officers..and ask them.. that are we really doing Good to the nation ??

The answer from them if they feel gulit and the realisation will itself do good for the nation.. !!

Please don't ask any detail or query.. We should only try to improve the system.. !! See you later.. !!

Aakash
@_rungta_