The government has announced a budget of NPR 2,124 billion for the upcoming fiscal year, setting a target of 7 percent economic growth. Finance Minister Dr. Swarnim Wagle declared an increase in the personal income tax exemption limit to NPR 1 million. The budget introduces five new levies aimed at protecting and promoting domestic production and skills development. Kathmandu, 15 Jestha.
Following the formation of the strongest government in history, many expected a major ‘departure’ in the economy. But have you seen any transformative projects in roads or transportation? No, you haven’t. Instead, the budget has actually decreased compared to last year. Have any significant projects in hydropower or irrigation been introduced? Not at all. Education shapes the country’s future. Has there been any transformative plan for education? No, there hasn’t. Moreover, the education budget allocation has been reduced. Generally, it is believed that 20 percent of the budget should be allocated to education, but only 10 percent has been assigned in this budget.
The government has pledged to create 1.5 million jobs in five years, which means 300,000 jobs per year. To generate such employment, significant domestic and foreign investment must be attracted. However, have you heard of any appealing initiatives to draw foreign investment? You have not. Finance Minister Dr. Wagle repeatedly claimed he would deliver a transformational budget. The election, won decisively by the government through the strength of the janajati movement, provided a real opportunity for departure. Yet, Minister Wagle has missed that opportunity.
Minister Wagle has initiated changes starting with a new approach to budget writing, moving away from traditional formats. Promising relief for entrepreneurs and expansion of the middle class to stimulate the overall economy, he announced comprehensive revisions to tax rates. He proposed raising the personal income tax exemption limit to NPR 1 million and reducing the maximum tax rate from 39 to 29 percent. The budget statement also highlights reductions in customs duties on 273 types of raw materials, consolidation of 11 customs levels into 7, and abolition of excise duties on 360 goods. However, reviewing the economic bill that sets tax laws shows that it introduces regressive tax policies rather than reforms.
Nepal introduced VAT as a single sales tax in 1997 after abolishing various colorful taxes. Yet, this budget has introduced five new colorful levies under attractive names: Domestic Production Protection and Promotion Fee, Skill Development Fee, Clean Infrastructure Fee, Education Equality Fee, and Health Promotion Fee.
Finance Minister Wagle also announced plans to abolish, transfer, or restructure 60 government entities to make the government more efficient. This is a positive move. Still, the savings from this action do not appear sufficient to support the increased budget size. The investment promotion programs announced are not new.
The government targets 7 percent economic growth for the upcoming year. To achieve this, expansion of investment is essential. On one hand, the government’s spending capacity remains weak; on the other, private investment has not been encouraged. Consequently, the probability of meeting the economic growth targets is slim.
