The persistent slow economic growth of Nepal has shown no signs of improvements. However, the annual tax collection has increased by eight folds compared to the data of past 15 years. During the fiscal year 1997/98, Rs 32.94 billion revenue was collected while in the fiscal year 2011/12 the collection increased to Rs 244 billion. The government has targeted to collect Rs 289 billion in the current fiscal year. Director General of Inland Revenue Department (IRD), Tanka Mani Sharma is hopeful on meeting the target. 

 

The market is flooded with the imported consumer goods because of the increasing demands. Similarly, the consumerism has also increased much. Therefore, government is collecting huge amount of import taxes. The government campaigns on tax awareness along with ongoing institutional improvements have contributed for meeting the revenue targets, said Sharma. There were 0.3 million tax payers registered in 2006/2007 and in the running fiscal year, the number has increased to a total of 0.8 million. 

 

The IRD has also projected addition of 0.1 million tax payers in the current fiscal year. Sharma further adds, “The successful efforts to increase the tax bracket in the previous years have resulted in increasing revenue collection. If the informal sector can be brought under the tax bracket, the revenue collection can be increased by 25 per cent.” 

 

“The improvement in tax collection is a positive sign but the huge amount amassed as import taxes is a matter of stress”, say some economists. This means that more foreign items are entering into the Nepali market. This puts a negative impact on the foreign currency deposit of Nepal. Economists Keshav Acharya said, “The remittance is the main factor for increasing demand in the market, and the remittance is not invested for productive use.” 

 

In the last fiscal year, a huge amount was spent on importing vehicles and gadgets such as mobile phones and laptops. “The increase in import tax cannot be considered good in any economy. It may appear as a good source of revenue at present for the government but in a long run, the economy will have to face negative consequences,” Shree Ram Poudel, an Economist said. He further added, “Nepal is slowly catching the Dutch disease.”