The government has adopted a policy mandating all economic transactions to be conducted through digital platforms, aiming to formalize the informal economy. President Ramchandra Paudel announced in the upcoming fiscal year 2083/84’s policy and program a focus on reviewing the tax structure and promoting voluntary tax compliance. The government also plans to integrate scattered taxes into a green tax system and expand double taxation avoidance agreements.
As part of expanding the tax base, the government is preparing to require that all economic transactions be mandatorily linked to digital platforms. President Ramchandra Paudel made this announcement while presenting the policy and program for fiscal year 2083/84 at the joint session of parliament on Monday. The program explicitly targets transforming the informal economy into a formal one. By incorporating all economic activities into digital platforms, the government intends to initiate a cashless, transparent, and revenue leakage-free formal economy.
According to President Paudel, a review of the tax structure is underway, as pledged by the ruling party, the Rastriya Swatantra Party, in its manifesto. This policy aims to reduce the tax burden on entrepreneurs and middle-class families. The government has emphasized prioritizing voluntary tax compliance. President Paudel expressed commitment to making the revenue system entrepreneur-friendly through technology-intensive revenue administration and a prompt tax dispute resolution mechanism.
The government has not indicated significant changes in tax rates. The private sector anticipates comprehensive reforms in customs duties and raw material tariffs from the new administration. The Federation of Nepalese Chambers of Commerce and Industry has urged Finance Minister Dr. Swarnim Wagle to maintain at least a two-tier difference in customs duties between raw materials and finished goods. The policy and program do not display extensive generosity regarding tax exemptions and incentives.
A major government initiative is the plan to convert fragmented tariffs into a green tax system. Currently, taxes are collected under various heads such as pollution and infrastructure. The policy program also includes plans to expand double taxation avoidance agreements with different countries, following this year’s policy and budget statements. However, no new agreements were signed this fiscal year. The government will exercise stricter control over smuggling at customs checkpoints. Additionally, processes for the refund of value-added tax and other taxes will be automated and time-bound moving forward.
