The tax office of Kathmandu's area two has made a startling discovery: a survey of 250 mom-and-pop businesses in the heart of the city revealed that most small retailers don't pay taxes or even file returns. This has reached epidemic proportions in Bagbazaar, where up to 70 percent of the stores don't pay tax. Businesses in Anamnagar are more well-behaved: most stores that filed returns and paid up were here. The department, which hopes to expand the tax net, has already sent notices to unregistered traders asking them to submit their transaction records. Of the 8,000 such retail outlets in Kathmandu, only 20 percent are in the tax net. Most shop owners claimed they "had just begun business" and were in the process of registering at the tax office. Small shops in the Kathmandu metropolitan city with an annual turnover of less than one million rupees are required to pay Rs 2,000 a year in tax. This drops to Rs 1,500 in municipal areas and Rs 1,000 elsewhere. The tax office, working with the association of retailers, is offering businesses a one-time rebate to encourage them to contribute to tax revenues.