Heat Of High Tax

One of the objectives of federalism is to smooth the way for the effective and efficient service delivery across the country. It seeks to judiciously distribute rights, powers, responsibilities and resources among the three-tier of government – federal, provincial and local. It is the vehicle of grassroots democracy for it brings the government and citizens ever closer and public goods and services are provided to them hassle-free. When the local government exercises many powers, the people will have direct access to the authorities, which help reduce red-tape and corruption to the greater extent. Federal system is also viewed as an effective tool to create environment conducive to the growth of business, industries and employment. But Nepal has confronted initial hiccups when it comes to promoting business and investment. It seems both the government and business sector face a catch - 22 situation. Federalism is an expensive political system that demands the allocation of humongous budget. In the first year of its implementation, the government needs extra amount to lay its infrastructure. For this, it has started to raise taxes by expanding its base. After all, the collection of taxes is only easy means for the government to grow its coffers. But as all levels of government began to introduce and impose taxes on the people on their own, the situation has become problematic.

The other day the business community raised the similar problem. They demanded that the government create congenial atmosphere to run the business. They complained that instead of facilitating the business and commerce, the three-layer governance system has made the business operation complex and tricky. Speaking at the National Meeting of the District and Municipal Chambers of Commerce and Industries under the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) in Birgunj, their representatives lamented that they have been forced to pay taxes to federal and local governments that are collecting them randomly. Some others registered their strong reservation about the rise in the interest rates by the banks. According to them, the banks have increased the interest rate of loan from 5-8 per cent to 12-15 per cent. They asked the government to tame the banks so that they will not charge more than 8 per cent interest on loan. Like the common people, the business people also feel the heat of the exorbitant rates of tax. Now it is necessary for the cooperation and coordination between the three-tier government and chamber of commerce and industries to avoid paying double taxes to the government.

At the meeting, idea of public-private-partnership (PPP) was also mooted. It was suggested that industries based on local raw materials, tourism infrastructure, sanitation and waste management, water supply, park development, construction and operation of national exhibition and sales centre and commercial agriculture should be run based on PPP. Chairman of Communist Party of Nepal (CPN) Pushpa Kamal Dahal Prachanda rightly noted that building national capital was essential to attract foreign investment. Nepal’s constitution has envisioned three pillars of economy – public, private and cooperative. The nation has got strong government that has guaranteed the political stability that is the key to the growth of economy. While the government needs to address the genuine demands of business community, the private sector has also equal role in achieving common prosperity and inclusive economic growth.


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