Ask any tax consultant in this country about the nitty-gritty of taxation laws and duties, and you get a standardised form response-a) evade tax that could legally be levied on you; b) find other ways to avoid a large assessment; c) wait for the next voluntary declaration scheme five years hence; and d) hire an expert to interpret the laws and pay tax. Less than one percent of Nepalis opt for the last choice. On 1 April, 2002, Nepal's new Income Tax law was made effective. It's strange that the effective date of the law is not the first day of the Nepali financial year, but of the Gregorian calendar. Then again, perhaps we shouldn't expect any semblance of normalcy from a law that not only resembles an epic in Sanskritised Nepali, but is still awaiting the arrival of an Act detailing its rules and regulations. There are controversies galore raging, and plenty of post-mortem seminars and workshops. One of the arguments being repeatedly and forcefully made in some quarters is that the law was no choice of Nepalis, but imposed on us by consultants funded by bi-lateral agencies. Given a choice, many say, perhaps Nepal would do without such a law.
Income tax has been one reason behind the complete stagnation of Nepali business, another sign of how no one wants to do anything professionally in this country. The very idea of transparency in this arena is ludicrous because taxpayers aren't given any incentives, and find that working with tax officials, aided by tax pimps in the garb of consultants, yields better results. The Beed will not even get into how many large investment opportunities have been lost because few outsiders want to deal with this sticky matter.
As for the new law, it is an attempt to do something, anything. And it shows. It hits individual taxpayers the hardest, as there is now absolutely no incentive to save. This country desperately needs more savings, and the general expectation was that we'd get better incentives to save, whether for housing or pension funds. But the new law seems to function on just the opposite principle. With insurance premiums and other savings schemes now taxable, the fate of life insurance companies and allied agencies is also up in the air.
This Beed is being inundated with bitter questions along the lines of \'why bother about Income Tax, people get away with illegal actions all the time'. The other argument, that one needn't pay taxes, as the money is simply used to fund jumbo cabinets, unwanted advisors and unaccounted-for expenditures, has also become something of a set piece. The naysayers are right. The government's so-called voluntary declaration scheme, VDIS, did little more than allow defaulters to bleach their black money. Through all conceivable media channels the government warned people of dire consequences and even drew up lists of defaulters. But the threats and finger-wagging died down with such great despatch, one can understand the frustration of those who did declare their wealth. Our lawmakers need to realise, to guide their own behaviour and that of others, that law-abiding, transparent actions are driven by incentive, not just goodwill.
There is no point constantly revising the laws. The number of taxpayers will not increase, and nor will collection, until we can properly implement at least one of our numerous Acts. The tax administration is in tatters, same as this benighted country's political administration. A lot remains to be done, and everyone knows it cannot be done. So here's something truly radical: scrap income tax in Nepal. At least business can stop wasting its time trying to play that silly old game, and get on with the business of business.
Readers can post their views at arthabeed@yahoo.com
