Nepali Times Asian Paints
ASHUTOSH TIWARI
Strictly Business
Taxing business


ASHUTOSH TIWARI


Tell people you work for the Tax Department in Nepal, and they will smile with envy. Most tax officers are known to supplement their salaries with the money they collect from a set of businesses.

I say 'from a set of businesses' because not all businesses (and individuals) pay taxes to the government. True, some businesses carry crushing tax burdens. These are the ones that have alienated officers at the Tax Department. Their cleverer rivals regularly hold soirees for tax officers and senior bureaucrats. They thus have an easy time, paying a paltry sum every year. This practice goes on for some years, until the government realises that money is running out, and that large swathes of businesses such as banks, insurance companies, schools, distilleries, movie halls, and individuals have simply not been paying their just share.

It then does what it does reflexively: provide temporary remedies to problems that require permanent solutions. Under the chairmanship of an ex-judge or a retired civil servant, it hastily forms an external commission. It calls it Tax Settlement Commission (TSC), and gives it authorities that trump those of the Tax Department. It tells the TSC, "Forget the Tax Department for some months. You have all the authority to assess what Nepali and Nepal-based multinational businesses owe to the government. Collect as much tax as you legally can." In the last 30 years, more than a dozen such commissions have been formed by various governments. What was originally designed as a temporary remedy to collect taxes has now become a permanent feature of our governance landscape.

Most businesses welcome a TSC. They see it as an independent window that allows them to air grievances, sort out tax burdens, and pay what they owe. To no one's surprise, the Tax Department sees the TSC as a rival, and some officers spend all their waking hours abusing the media to malign TSC's activities. But leaving aside these territorial battles that flare up every so often, the larger question is whether there aren't ways to better facilitate the collection of taxes in Nepal. Some are as follows:

Launch tax-payer education programs: Most businesses and individuals are willing to pay taxes, but they do not know where or how to begin. They do not want to be harassed by officers and taken advantage of by middlemen. If the government holds regular tax-payer education programs, and makes them easily available to all in a transparent manner, old and new tax-payers are likely to have a better sense of their obligations.

Make tax rules simple: Sure, it's not in the interest of tax lawyers and bureaucrats to make these rules simple. But since the gap between revenue potential (estimated to be additional Rs. 25 billion rupees) and revenue collection (less than Rs. 3 billion by the most recent TSC) is wide, it's in everyone else's interest to have crystal-clear rules that reduce the chances of there being multiple interpretations of, and therefore confusion about, the same set of rules.

Set up a grievance window: At present, if business owners do not get along with tax officers, they risk being slammed with high tax burdens. Until a TSC comes along, most businesses have no recourse against such arbitrary measures. A separate dispute-settlement body will help squeeze egos, anger, and acts of retaliations out of the transactions.

Continuous training of tax officers: Tax officers are government's front-line salespeople. Their customers are members of the public. If a tax-officer's job is reframed as a 'customer service job', with all the attendant rewards and incentives, then, the job might bring smiles of genuine pleasure to most taxpayers who have to meet and do business with tax officers.



LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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