Tax rates sans evaluation of impact on consumers, businesspersons to keep recession up: FNCCI

KATHMANDU: The annual budget for fiscal year 2023/24 has embraced private sector as the facilitator of economic development and included the suggestions presented by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). This has increased the possibility of long-term investment but has not been able to adopt measures to reduce the impact of the immediate recession, FNCCI has said commenting on the budget unveiled by Finance Minister Prakash Sharan Mahat at the joint session of Federal Parliament on May 29. FNCCI has welcomed the announcement of carrying out an environmental impact assessment, land acquisition, use of wood and exploring the potential of other mines in different places including Dhauwadi area in Nawalparasi district. The opening of extraction of stone, gravel, sand mining from suitable places without affecting the environment will help in reducing the trade deficit, FNCCI stated. Likewise, the provision of using domestic goods even if it is 20% more expensive, concreting inclined roads, supporting domestic products in projects, development of special economic zone (SEZ) and industrial districts, and farming in barren land will help in import substitution. Promotion of various funds and subsidies for startup development, and facilitation for opening a company will allow startups to enter the market, the federation viewed. The budget has announced that the subsidies given for exports will be provided every three months. However, it is silent on the part of promoting potential exportable goods. The provision of engaging private sector in electric power trade and facilitating the construction of hill stations near India will help in earning foreign currency, the FNCCI said. However, the budget is silent on extending deadline, price adjustment and arrears payment of construction professionals necessary for liquidity flow in the market, development and demand creation. The expansion of tax rate without evaluating the impact on the general consumers and businesspersons will keep the recession up and will have negative impacts on the economy, FNCCI stated commenting on the budget for the next fiscal year. The increase in customs duties on industrial raw materials such as vegetable ghee and oil has also increased consumer prices while production has been discouraged. The budget has ignored the private sector's demand that there should be different tax rates and duties for raw materials and finished products for the sustainable promotion of domestic industries. Similarly, the provision of value added tax (VAT) on electric vehicles may be counterproductive. VAT applied to some of the primary agricultural products and fruits that were getting discounts has increased consumer prices. This will cause trouble to consumers while the demand in the market will decrease further, FNCCI opined and demanded an amendment to this arrangement. Further, the luxury tax imposed unnecessarily on various goods and services will further reduce demand and create a negative impact on the economy. Meanwhile, the federation has been receiving complaints from its members about the impact of the changes in tax rates on businesses. FNCCI, the Ministry of Finance and other relevant bodies have continued with dialogue and discussion for improvement of the arrangements that discourage businesses. FNCCI has expressed hope that the government would improve the sensitivity of entrepreneurs and consumers. Considering the pressure on revenue this year, the federation has opined that the government is trying to impose burden on businesspersons and consumers to increase resources. In addition to increasing capital expenditure, if measures to increase demand cannot be adopted immediately, the economy which has been in recession for one and a half years, has little hope of improvement in the next fiscal year, FNCCI stated. It is unlikely that the government will achieve the target of 6% economic growth and 6.5% inflation. FNCCI has urged all stakeholders including the Finance Ministry to immediately address the demands of private sector and make the economy sustainable. READ ALSO:

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