Discretionary Power Opposed

If the new tax law is to give more discretionary power to tax authorities, better have no law at all.

Newer, hence supposedly better, Income Tax Act is currently under consideration of the parliament and it is feared that the parliament will pass it while the country is bogged down in the more larger issue of Maoist insurgency. However, the business community is finding time to oppose it and to demand amendments, though the government is not ready to listen.

Why is the business against the proposed new Income Tax Act ? If you ask that to the government authorities, the explanation you get is simple : The business does not want to pay the tax. Perhaps they are right. Anyway, nobody wants to pay heavy taxes, hence the principle that better the government lesser the taxes. But if you ask the same question to the business community of Nepal that is going non-stop opposing the proposed Act, you get a list of reasons.

But what exactly is more important reason for the businessman's criticism to the proposed law ?

When we asked that to 150 business leaders based in Kathmandu, 111 of them replied. And upon tabulation of their answers (see the charts), one can see that the strongest reason is the excessive discretionary power that the proposed law provides for the tax authorities - 74% of the respondents singled out this to be the most important reason, followed by the fact that the proposed law does not include suggestions put forward by the business community. Some 54% of the respondents think that the proposed law in difficult to be implemented, while 67% oppose it because of the clumsy language, and 70% of them complain that the bill was rushed to the parliament without enough discussions in the public.

The government has been arguing that the new law was needed to make the country's taxation system compatible with international standards and the business community does not seem to be opposed to that. A sizeable percentage of the respondents rated the proposed law to be better though a thin majority said the existing law is better than the proposed one. In their comments, the respondents were fairly divided about the details of how to go for making the law compatible to the international practices. While some pointed out that the situation of the country's economy was not yet suitable to make the tax law exactly as it is in developed countries (and so argued for gradual changes), some others said the business community should be taken into confidence before introducing the changes.

Among the respondents, over 81% included those who say that they are familiar with the clauses of the proposed Act either by going through the text personally or by listening to the experts in various workshops. One respondent also noted, "our auditors, lawyers, finance managers and all are unable to fathom the proposed legislation", thus indicating that it has become an abstract piece of legislation.

Then, what is the business community going to do ? A substantial majority (63%) is in favour of taking strong steps to get the proposed law amended before the parliament passes it. Even those who ticked 'no' in response to our questions (see the chart heading for how the questions were worded), added a comment that they did not like the idea of going for a strike, but they favour some strong measures.

1. Why do you oppose the bill?

2. Do you agree to the plea of the authorities that the provisions of the existing Income Tax Act need to be made compatible with international practices?

3. Do you think that the existing Income Tax Act is better overall than the proposed one?

4. How familiar do you think you are yourself about with the proposed Act?

5. Should the business community take a strong step (e.g. going for a strike) against the proposed income tax law as it did in the past against VAT?

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