February 15: At a time when the government has been expressing concern over the decline in revenue collection, businessmen insist that the revenue leakage is taking place due to the government policies. They say that the lack of reforms in the tax system and the strict policy on foreign trade have led to the flourishing of unauthorized trade in the border areas.

They claim that the illegal import of goods is having a direct impact on the revenue collection of the government while it is also adversely affecting legitimate domestic trade. Businessmen say that the unauthorized import of daily consumer goods from India through the open border has increased significantly in recent times.

Ashok Kumar Temani, president of the Madhes Province chapter of the Federation of Nepalese Chambers of Commerce Industry and Commerce, said that the government should radically reform the revenue system to control such illegal imports. The illegal import of goods on which the government has imposed high customs duties has increased through the open border, says Temani.

According to Niranjan Agarwal, the owner of Sweetmart Food Industries, says that goods such as sugar, cashews, raisins, which are subject to high customs duties, are rarely imported through the customs.

“There is no shortage of such items in the market. As the businessmen were subjected to 30 to 45 percent of customs duty on these items, they simply opted to import them through the illegal channels. All steel utensils are imported illegally. Because of the high customs duty on steel vessels, they evade the customs,” he said.

Customs officials say that the number of such items passing through the customs is decreasing. Daily essentials such as rice, lentil, oil, potatoes, onions, biscuits, cumin and coriander, are coming through illegal channels.

After the government imposed VAT on potato and onion from the current fiscal year, its legitimate import has almost come to a standstill. The policy of curbing the import of peas, pepper, betel nuts and dry dates is still in place. Traders say that there is no shortage of such items in the market, but the prices have skyrocketed.

Clothes are the main smuggled items. Industrialists say that the domestic industries are facing problems due to the smuggling of clothes. Traders allege that these smuggled goods are brought to Kathmandu in collusion with the government agencies responsible for checking smuggling.

A customs officer of Birgunj Customs said that the government has not paid attention to policy reforms as the existing loopholes have become a means of earning for politicians and the government agencies responsible to curb illegal imports.

The businessmen in general complain that the legitimate business has been badly affected dye to the illegal imports.

Madhav Rajpal, vice president of Birgunj Chamber of Commerce, complained that the government has turned a deaf ear to the legitimate concerns of the traders.

India has radically reformed the tax system since July 2017. India levies a Goods and Services Tax (GST) of 5 percent on most daily consumer goods consumed by the general consumer. This has reduced the price of consumer goods there. Since the implementation of GST in India, illegal imports have started to increase in Nepal. On the other hand, all levels of government in Nepal have been imposing ‘tax terror’, according to the businessmen.

"Since we have to pay high customs duty and 13 percent VAT on all goods, the price of daily consumption goods has also increased. Illegal imports from India have increased due to this price gap. The situation will not improve until the government reforms the tax system,'' said businessman Niranjan Agarwal.