Kathmandu. The Ministry of Finance is preparing to set a uniform tax rate for petroleum vehicles and electric vehicles through the Finance Act 2082. The ministry is preparing to set a uniform tax rate since the tax exemption given to electric vehicles is beneficial only to the seller.
Currently, the Ministry of Finance is busy preparing the budget. In the tax rate revision to be held on the night of Jestha 14, the same tax rate is being set for the two types of vehicles. According to an employee of the Customs Department, a proposal is being made to impose the same tax rate on electric vehicles and petroleum vehicles.
The employee told Singha Durbar, “The state has already lost more than 100 billion rupees in revenue from the import of electric vehicles. We have concluded that the state cannot bear a greater loss than this. We clearly propose that it should be equalized. Now the final decision will be in the hands of the Finance Minister.”
The Customs Department has concluded that the concessions given on EV vehicles have not reached the consumers and have benefited only the sellers. Last fiscal year, the department had suggested increasing the tax on EV vehicles. But the then Finance Minister Barshaman Pun had flatly rejected the department’s proposal. After the then Minister Pun took a stand, the tax on EV vehicles was increased only slightly.
In other countries of the world, EV vehicles are taxed more than petroleum. But in Nepal, EV vehicles have been given more tax exemptions. EV vehicle sellers make a profit of up to 2.75 million on a single vehicle. In this way, only the sellers have started benefiting by abusing the facilities provided by the state, so the tax rate is being changed. However, this proposal of the department will have to be accepted by Finance Minister Bishnu Prasad Poudel.
The report of the High-Level Advisory Committee on Tax System Reform has also proposed to make the tax rate equal for electric vehicles and petroleum vehicles. The government’s policy to encourage electric vehicles has kept the tax rate on electric vehicles very low compared to the tax rate on non-electric vehicles. For example, a total duty of 42.95 percent is levied on the price of electric jeeps, cars, and vans with an engine capacity of more than 50 kW and up to 100 kW, while a duty of 235.61 percent has been imposed on the price of jeeps, cars, and vans of the same type running on fuel with an engine capacity of 1000 to 1500 cc.
While the import of electric vehicles is likely to put pressure on foreign exchange reserves, the report states that a decrease in the import of fuel-powered vehicles is likely to reduce the revenue generated from vehicles, their parts, and fuel.
The high growth rate in the import of electric vehicles has led to a decrease in the import of fuel-powered vehicles. The reduction in fuel imports is also leading to a decrease in revenue collection.
The report states that the loss in revenue due to the reduction in fuel-based vehicle imports should be weighed against the benefits to the overall economy from the use of electric vehicle imports, international practices, and policies adopted by neighboring countries. The report states that the government will have a relevant basis for adjusting the tariff after the Ministry of Finance receives the conclusions of a study on the measurement of pollution levels according to the customs tariff heading/subheading indication and a ten-year economic analysis between electric vehicles and non-electric vehicles with the support of the World Bank.
In addition, the report also proposes to study options such as keeping the basic customs rate the same for all vehicles and imposing an additional “Green Tax” on carbon-emitting vehicles and reach a conclusion.
The Ministry of Finance concludes that the benefits to the economy from the use of electric vehicles in the short term, international practices, and neighboring countries should be studied in the medium term. It has suggested that by studying and analyzing the policies adopted by other countries, the huge difference in the rates of electric vehicles and non-electric vehicles should be adjusted and the basic customs rate should be the same for all vehicles and an additional “Green Tax” should be imposed on carbon-emitting vehicles.
Former Finance Minister Dr. Prakash Sharan Mahat had formed a high-level suggestion committee on tax reform under the leadership of former Finance Secretary Vidhyadhar Mallik to review the overall revenue system. The committee includes Laxman Aryal, Ram Prasad Gyawali and Shyam Prasad Dahal. The committee submitted its report to former Finance Minister Barshaman Pun. However, former Minister Pun refused to implement the report.
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