Kathmandu. The High-Level Economic Reforms Advisory Commission has recommended the government to abolish the Revenue Investigation Department. The commission submitted a report to Deputy Prime Minister and Finance Minister Bishnu Prasad Poudel today, recommending the abolition of the department for reforming the revenue system.
‘The structure of the Revenue Tribunal should be improved and the level should be increased, and in the context of other agencies for tax investigation, the Revenue Investigation Department should be abolished and the capacity of other agencies should be enhanced,’ the commission’s report said.
The commission has suggested reducing the current period for tax audits from four years to three years as per the provisions of Section 101 of the existing Income Tax Act. Similarly, the report mentions that it would be appropriate to provide some exemptions in the integrated property tax to encourage large commercial and multi-family construction.
The commission recommends that the penalty amount under Section 120 of the Income Tax Act, which is being imposed for general errors and omissions other than intentional tax evasion, should be reduced by 50 percent, that Section 57 of the Income Tax Act should not be attracted in the case of regular and family reasons or posthumous share cancellation and transfer, and that Section 57 of the Act should be amended to be in line with good international practice.
Similarly, since it is not good practice to levy income tax in cases where there is no actual income, the provision of Section 95 (a) of the Income Tax Act should be completely removed. The commission has suggested that arrangements should be made to exempt value-added tax on electronic payments up to Rs. 5,000.
The commission has suggested that tax laws and rules should not be applied retroactively, that taxes paid at the local level should also be linked to the Permanent Account Number (PAN), that only 10 percent income tax should be levied on export income, and that tax cases and disputes should be resolved in a timely manner.
Similarly, the report includes provisions for automatic adoption of tax benefits specified in thematic laws by the Economic Act, adding provisions related to the General Anti-Avoidance Rules in the Value-Added Tax Act, and gradually reducing the number of items subject to excise duty and limiting them to only those that have adverse effects on public health and the environment. .
The report concludes that a strategy should be adopted to increase non-tax revenue in a context where tax rates are already high. Similarly, the commission has also suggested converting government-owned corporations into public limited companies and selling shares to the private sector.
This will also help in the development of the capital market and it is expected that the managerial capacity of these institutions will improve as the private sector is also involved in the management of the corporations.
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