KATHMANDU, May 28: The government is almost at the final stage of drafting the annual budget for the fiscal year 2025/26 amid a number of ongoing economic challenges that include increasing sources of government revenue while introducing programs to boost confidence of the private sector and the general public towards the economy.
With the budget announcement date of May 29 is at the doorstep, allocation of major expenditures have been set while a number of issues related to taxation will be finalized only by Wednesday evening, according to an official at the Ministry of Finance (MoF).
“While the ministry is mulling to incorporate a number of non-taxed goods and services under the tax bracket, it is looking forward to relieving some from tax burden.”
The MoF source said that the government is considering exempting value added tax (VAT) on airfare. Instead, the government is likely to increase pre-declared income tax on imported foods from existing 2.5 percent at a time when traders have been demanding the government to remove income tax and agriculture reform fee in the segment.
Likewise, the government is looking forward to increasing capital gains tax on share transactions to 10 percent. Based on the duration of share transactions, the investors now pay capital gains tax between 5-7.5 percent. The government is reportedly planning to refrain from slapping additional income tax in share transactions.
Citing a fast growing digital economy, the MoF is considering embracing electronic transactions under the tax bracket. Likewise, additional tax on extraction of mine-based construction materials and extra green tax on brick production are under purview of the government to raise more revenue.
The government will be incorporating a number of suggestions forwarded by the High-Level Economic Reform Advisory Commission led by former Finance Secretary Rameshwor Khanal in the budget for the next fiscal year. Last week, a cabinet meeting also approved the recommendations of a high-level tax system reform committee while the government has expressed commitment to implement them with priority.
The MoF has already tabled the Principles and Priorities of Budget in the Parliament. The roadmap of the budget has set thematic priorities in the areas such as economic reform, job creation, development of the digital economy, infrastructure development, and social security.
According to the MoF, it has finalized the Finance Bill, the Appropriation Bill, the National Debt Management Bill and the Debt and Guarantee Bill along with the preparation of expenditure estimates for the next fiscal year.
Meanwhile, the MoF is under pressure to include ad hoc projects which are not kept under National Project Bank (NPB) even at the last hour of the budget preparation. Shyam Prasad Bhandari, spokesperson for the MoF, said new projects are getting entries in the budget document. “While MoF is committed to implement the concept of NPB, we are putting effort to align the projects in coordination with the line ministries and the National Planning Commission,” said Bhandari.
The Financial Procedure and Fiscal Responsibility Regulations 2021 has barred the government from allocating budgets which are not maintained under the NPB. The law has defined the standards that any project to be included in the budgetary system must be incorporated in the NPB by mid-April every year. Even in the five years since the law came into effect, the government has failed to abide by its own rule.