High-level Commission’s Recommendations for Revenue Reform Sees Minimal Progress: Study

The government has so far partially implemented just four of the 33 recommendations on revenue system reform submitted by the High-Level Economic Reform Recommendation Commission led by Finance Minister Rameshwore Khanal, according to a recent study by the Confederation of Nepalese Industries (CNI).

The study shows that out of the 33 points proposed by the Commission and additional reforms outlined in the government’s Economic Reform Implementation Action Plan, 2082, only four have seen partial progress.

The findings were made public during a Public–Private Dialogue on Revenue System Reform held in Kathmandu on Wednesday in the presence of Finance Minister Khanal. The study report highlights partial progress on improving the efficiency of revenue administration and upgrading the structure and capacity of the Revenue Tribunal.

The government has also partially implemented the Commission’s recommendation to scrap Section 95 (A) of the Income Tax Act, arguing that levying income tax where there is no actual income is not a good international practice. Likewise, the removal of value-added tax (VAT) on electronic payments up to Rs 5,000 has been implemented.

Speaking at the event, Finance Minister Khanal said the government wants to institutionalize investigation and supervision mechanisms as an alternative to the Department of Revenue Investigation but noted that the current election government cannot frame new laws. Emphasizing that economic prosperity is impossible without the private sector, he assured the business community that their concerns would be addressed.

“It has already been 60 days since I joined the government,” he said. “Some recommendations of the Commission and the government’s action plan could not be implemented, but efforts are underway to make tax administration more transparent.”

Khanal also informed the gathering about revisions related to the Double Taxation Avoidance Agreement (DTAA). He said Nepal has notified seven countries after identifying provisions inconsistent with Section 73 (5) of the Income Tax Act, 2058, and that the government intends to move forward on renewing business permits based on tax clearance certificates. He added that decisions on adjusting customs duties on raw materials should be taken by the next elected government.

He argued that improving customs tariffs and duties would help reduce production costs and promote domestic industries.

CNI President Birendra Raj Pandey said reforms in the tax system are necessary to boost investment. Pointing to the current challenges in the economy, he said market demand has not increased, industries are operating below capacity, and liquidity remains idle despite low interest rates. “Idle money is not a good sign for the economy,” he said.

He said that the government must address the issues highlighted by the commission and carry out tax reforms as soon as possible to improve investment climate. Pandey said policy stability is essential for investment growth and for creating an industrial-friendly environment. “Not only domestic investors but foreign investors as well make investment decisions based on the stability of tax policies,” he said. “Tax policy itself forms the basis of investment, so it must be given serious attention.”