New Revenue Policy in Offing

The finance ministry is preparing the Revenue Policy for the fiscal year 2009-10. On the basis of the policy, the revenue target will be set though according to tradition the ministry increases the revenue target every new financial year. “According to tradition, successive govenrments have been increasing the revenue target by over 15 per cent to 20 per cent every year,” said Dr Shanker Sharma, former vice-chairman of the national Planning Commission (NPC), the country’s think-tank.

“If revenue target is in- creased by 20 per cent, it will come to around Rs 170.06 billion. The size of the budget might also go beyond Rs 280 billion. Setting a high revenue target will help stop leakages and corruption,” he opined. “If the government wants to increase the revenue target, the infrastructure is in place,” said acting revenue secretary Krishna Hari Baskota. Due to the Voluntary Disclosure of Income Sources (VDIS) also, the tax net has widened giving room for increase.

However, the business community has been requesting the government not to be revenue-oriented but to implement earlier policies. Former Finance Minister Dr Bhattarai had set a revenue target at Rs 141.72 billion — that was dubbed highly ambitious — for this fiscal year. Dr Bhattarai’s total budget size for this fiscal year was Rs 236.15 billion. The encouraging collection of revenue is attributed to three major reasons: priority of the finance ministry for revenue mobilisation, fear in the business community of the Maoist leadership and the alacrity of the leadership itself. VDIS and rising inflation — that pushed customs and VAT up — helped achieve Dr Bhattarai’s revenue target. But this year, the price hike is expected to come down and that will hit the VAT and customs collection.

The finance ministry has, however, met this year’s ambitious target that was over 33 per cent than last fiscal year. By the end of Jestha — the 11th month of the current fiscal year — the ministry collected a total of Rs 121.24 billion, surpassing its target of Rs 117.80 billion for the month. The total revenue target is short by only Rs 17.37 billion. “The target for the last month of this fiscal year, Ashad (mid-June to midJuly) is Rs 23.92 billion but only Rs 17.37 billion is needed to meet the total target of Rs 141.72 billion as in the earlier months we have surpassed the target,” Baskota added. The ministry had collected Rs 90.17 billion during the same period last fiscal year. In comparison to the same period last fiscal year, revenue collection has increased by Rs 31.07 billion — a 34.4 per cent growth. Despite its failure to spend on development activities, the previous finance ministry under Dr Bhattarai concentrated on revenue mobilisation by forming separate desks for separate types of taxes and systematisation of tax and regular follow-up.