Govt sets revenue target of Rs 430b for 2014/15

Highlights:

Revenue target for 2014/15 set at Rs 430 billion
Focus will be on raising collection from VAT
Tax rates won´t be raised in most of the headings
Private sector for expanding tax net rather than increasing rates

The government has set a target of mobilizing total revenue of Rs 430 billion in the coming fiscal year.

Though the government is likely to miss the revenue target in the current fiscal year, it has set a target of achieving 19 percent revenue growth in the fiscal year 2014/15.

Revenue mobilization in the first eleven months of the current fiscal year stood at Rs 308.21 billion. Revenue mobilization during the period grew by 19.71 percent compared to the target of 19.76 percent. The government has set a target of mobilizing Rs 354.5 billion in the current fiscal year.

Minister for Finance Dr Ram Sharan Mahat a few days ago said that the government will focus on expanding revenue sources rather than raising rates.

“The government will not raise tax rates on existing headings except on liquor and cigarette, among others,” Rajan Khanal chief of the Revenue Division under Ministry of Finance (MoF), told Republica.

As usual, Value Added Tax (VAT) is set to become the largest contributor to total revenue collection in 2013/14. VAT contributed 30 percent of the total revenue, followed by customs duty and income tax with contribution of 20 percent each in the first 11 period. Similarly, excise duty and non-tax revenue contributed 14 percent and 13 percent, respectively.

In the new budget, the government is targeting to raise the contribution of VAT which is also known as consumption tax. “We are wondering why VAT collection is not increasing at a healthy rate despite high consumption in the country,” Khanal said, adding, “We consume more than 90 percent of out gross domestic product (GDP). We are saving very less.”

Khanal said they were focusing on VAT as revenue collection from income tax and customs duty will not increase drastically.

After the government launched investigation on VAT defaulters three years ago, collection of VAT from construction sector has improved significantly. “Collection of VAT from the construction sector used to be very low in the past years,” added Khanal.

Meanwhile, private sector has termed the government´s revenue targets for the coming fiscal year as ambitious. Hari Bhakta Sharma, senior vice president of Confederation of Nepalese Industries (CNI) suggested to the government to expand tax net rather that torturing taxpaying by raising rates.

Source: Republica