Scrap the Scrap Tax
NCCI has relaunched a campaign against the notorious scrap tax that the municipalities and district development committees have been collecting. The protest should not be limited to scrap tax alone. The entire tax collection system by the local development bodies is faulty. Though these bodies are authorized by law to collect several types of taxes including scrap tax (hence it is not illegal), it is illogical, and hence the strong protests from the business community.
For one, the scrap tax has been penalizing those who remove the scrap (garbage) from the town whereas the residents of all the municipalities are complaining of piling up garbage heaps.
Second, the local authorities are imposing tax on exports. There can be some economic sense to justify tax on import so as to protect the local production, but only an insane authority would think of taxing exports. If this is true for the country, it is true also for a municipality or a district. Yes, there can be some exceptional cases. For example, countries sometimes tax or even ban export of food on the pretext of safeguarding the interests of the citizen. Similarly, export tax or ban is imposed on certain goods if the country that receives such exports comes up with strong request to do so. The example is Nepal’s export duty on vegetable ghee export to India. One more exceptional case is when the export item is related with the environment and public health. For example, banning export of stones from quarries as that may disturb the soil balance. However, in all normal circumstances, every sensible government encourages exports.
Therefore, by taxing the exports the governments that are ruling the municipalities and districts are behaving in a manner that falls on the category of the insane. This is crime against the residents of the respective municipality or district. Due to such behaviour of the district or municipal authorities, investment in the district or municipality is not growing and the local people are not getting enough jobs.
The local authorities are misusing their right to collect tax in other respects as well. For example, they are not authorized to impose any tax on goods from another district that are on the way to the third district. But this rule is blatantly violated and the traders and transporters have raised strong voice against this illegal activity. However, they have not been heard. A few months ago, a trader had presented in a press conference a documentary proof that he had to pay such tax at 22 locations for a single cargo that was moving from one district in the far west to another district in the far east.
Though the government took up this matter seriously and asked the local authorities to stop such illegal activities, it was not successful. Failure to stop it will have serious consequences in the future. It is feared that the situation will worsen in the federal set up which further bolsters the powers of the local authority. If this practice is not discouraged right now, the business community itself would be the strongest opponent of the federal system of governance.
(By Arthaprakash Bidyarthi)
