Subject Introduction

In the parliamentary elections held on 21 Falgun 2082, the Nepali people have given an unprecedented vote to the National Independent Party to improve the country's economic situation. To fulfill that historic responsibility, it is indispensable for this party's unanimous government to launch a comprehensive economic reform program. An important aspect of economic reform is tax reform. Tax reform requires comprehensive reforms in tax policy and administration as well as tax laws.

Tax laws are tax-related acts and rules established by the government, which regulate how taxes are levied, collected, and implemented on individuals and businesses. These laws define the rights and duties of taxpayers, specify compliance procedures, and ensure that revenue is collected in a systematic and transparent manner.

In the process of tax law reform, measures such as making tax acts and rules simple, easy, clear, and transparent, reducing excessive cross-references and duplication between various provisions, closing loopholes in the law, strengthening compliance measures, and bringing linguistic clarity should be adopted. Similarly, while reforming tax laws, efforts should be made to integrate tax laws and regulations into a coherent framework and to coordinate them with international standards.

Development of tax laws in Nepal

Like other countries, Nepal also has a practice of formulating tax laws to impose and collect taxes. During the Rana period, tax notices were issued not for the entire country but for a specific geographical area. In this way, when the same type of tax was imposed in different regions of the country through different notices, the form, structure and operation process of the tax varied in different regions, making the tax system unequal, inefficient and unscientific.

After the advent of democracy in the country in 2007, an effort was made to issue a single tax law throughout the country instead of imposing taxes through different notices issued for different regions during the Rana period. In this context, the ‘Tax Collection Act, 2012’ was issued. Similarly, the government adopted a system to levy various types of taxes under the Economic Act to impose taxes.

Separate tax-related acts and rules are issued to legally organize the major taxes imposed under the Economic Act. In that context, the Excise Act, 2015 was first issued in 2015 to levy excise duty on goods manufactured or produced in Nepal. The Excise Act, 2058 was enacted to modernize the excise system, and the Excise Regulations, 2059 were issued under this act.

Similarly, the Customs Act, 2019 was implemented throughout the country to end the tradition of collecting customs revenue separately by Kathmandu, Terai, and Hill Customs, based on the Rana-era Sanad-Sawal. All Sanad-Sawals that conflicted with this Act and the rules made under this Act were repealed. The Customs Act, 2064 was issued in the context of modernizing the customs law, and it was replaced by the Customs Act, 2082.

The Economic Act, 2016 introduced the imposition of income tax on business profits and wage income. To manage it, the Business Profits and Wages Tax Act, 2017 and the Business Profits and Wages Tax Rules, 2017 were issued. These Acts and Rules were replaced by the Income Tax Act, 2019 and the Income Tax Rules, 2019. The Income Tax Act, 2031 was implemented instead of the Income Tax Act, 2019. And, under this Act, the Income Tax Rules, 2039 were issued. Similarly, to modernize the income tax system, the Income Tax Act, 2058 was implemented and the Income Tax Rules, 2059 were issued under this Act.

In addition, the Sales Tax Act, 2023 was implemented to legally manage the sales tax implemented by the Economic Act, 2022 and the Sales Tax Rules, 2024 were issued under this Act.

The Value Added Tax Act, 2052 was enacted to impose and collect value added tax with the intention of imposing a single value added tax on goods and services with a comprehensive basis, encompassing sales tax, hotel tax, contract tax and entertainment tax. The Value Added Tax Regulations, 2053 were issued under this Act.

Review of Current Tax Laws

Currently, in Nepal, various taxes are levied under the Economic Act, of which special tax acts and rules are in place to operate income tax, value added tax, excise duty and customs duty. And, there is no provision for acts and rules to operate them for other small, petty taxes, fees and charges. Thus, if taxes are imposed through the Economic Act and no provision is made for detailed tax acts and regulations, the tax system may become unclear, inefficient and controversial, and policy continuity will be weakened. A comprehensive legal framework is essential for an effective, fair and transparent tax system.

Over the past two decades, the Value Added Tax Act has been amended 28 times, the Income Tax Act 29 times, and the Excise Act 28 times. Thus, various amendments to major tax acts were implemented on a haphazard basis without study, homework, and public consultation, while some were also amended due to pressure from middlemen. Various distortions and inconsistencies in the tax law have made the tax system economically inefficient and administratively unnecessarily complex.

The Government of Nepal had formed a High-Level Tax System Review Commission under my chairmanship in 2071. Although the commission interacted with various stakeholders, it could not implement new steps to improve the tax system. However, stakeholders had suggested that the tax system could be greatly improved even if the amendments made on a haphazard basis at different times were repealed.

Another problem with Nepal's tax law is the implementation of various separate tax laws. Currently, there are Income Tax Act, Value Added Tax Act, Excise Duty Act and Customs Act and various regulations under these acts. These laws have been developed as independent acts, under which all administrative procedures related to a specific tax, such as registration, submission of returns, tax payment, tax refund, tax audit, collection of arrears, fines, review, appeals, etc. are included in the relevant tax act.

In the system of creating a stand-alone act covering each tax-related structure and operational process in each tax law implemented in terms of tax, the definition of various tax-related matters may be different. There may be no uniformity between the administrative procedures of different taxes. The same taxpayer has to complete different processes and procedures to pay different taxes, and various tax-related processes are unnecessarily repeated and there is a possibility of conflict and difficulty in maintaining coordination. Similarly, under such a system, even if the same type of provision is amended in one act, the other act may not be amended at the same time and accordingly. Similarly, both taxpayers and tax administrators have to study various laws and regulations, which increases tax compliance and collection costs, and in a system where tax laws are not automatically amended by economic laws, it is likely that it will not be easy to collect annual amendments to various taxes.

Alternative tax law structure

In the context of tax law formulation, there is an alternative approach to implementing a ‘single tax code’ instead of making separate laws for each tax. A single tax code is a unified legal framework that regulates the tax system within a country. It organizes the structure and administration of various taxes by incorporating the substantive provisions and procedures scattered in various acts into a single law.

Another alternative to structuring tax laws is a ‘single tax administration/procedure code’, which integrates all the procedures related to various taxes, while the substantive provisions of taxes are maintained in separate acts.

Single tax code

Tax procedures are mostly the same for all taxes. Bringing all these together in a single law ensures consistency, eliminates duplication and inconsistency. And, when amending, changes need to be made in one place.

A single tax code helps taxpayers and administrators rely on a single law instead of different laws, which reduces complexity. And, it reduces the compliance costs of taxpayers and also reduces the administrative costs of the government.

Similarly, adopting a single tax code instead of different laws increases transparency. Bringing all tax-related provisions together in one place reduces the possibility of different interpretations and ensures uniform implementation, which strengthens good governance. It also reduces confusion arising from different tax treatments in the same transaction. And, it makes it easier for domestic and foreign investors, businessmen and other stakeholders to understand the tax system.

Similarly, the Single Tax Code reduces duplication and overlap between different tax laws, which simplifies tax administration processes from registration, filing, assessment to tax audits.

Consolidating all tax provisions into one law ensures transparency and legal certainty. Businesses and individuals can plan their financial decisions based on clear responsibilities and procedures.

Development of the Single Tax Code concept in Nepal

The suggestion to implement a Single Tax Code in Nepal was first made by the High-Level Tax System Review Commission formed under my chairmanship in 2071 in its report submitted to the Government of Nepal on 15 Ashad 2072. Immediately thereafter, the Budget Statement for 2072/73 presented in the Parliament on 29 Ashad 2072 proposed that ‘a tax code will be prepared by integrating the provisions in various revenue-related laws and regulations’. Similarly, the Ministry of Finance’s Revenue Policy and Program and Implementation Action Plan for 2072/73 included a program to prepare a unified tax code.

In the process of tax law reform, measures such as making tax laws and regulations simple, easy, clear and transparent, reducing excessive cross-references and duplication between various provisions, closing loopholes in the law, strengthening compliance measures and bringing linguistic clarity should be adopted    The Ministry of Finance had received in-principle approval from the Ministry of Legal Affairs and Parliamentary Affairs to draft the Tax Code in Falgun 2072 and in-principle approval from the Council of Ministers in Chaitra 2072.   

Similarly, in the budget statements of various fiscal years since 2073/74, it was proposed to present the Unified Tax Code Bill to the Legislature-Parliament to simplify and modernize tax laws and procedures  . Accordingly, the revenue policy and program and implementation action plan of the Ministry of Finance since 2073/74 and the annual program of the Department of Internal Revenue were included in the program related to the creation of a single tax code   

Status of preparation of Single Tax Code in Nepal

A quality circle was formed in 2073 under the chairmanship of the Director General of the Department of Internal Revenue to draft the Single Tax Code. The draft of the Single Tax Code was prepared through the joint efforts of the members of the circle and tax experts.

The proposed code covers income tax, value added tax, excise duty and other minor federal taxes administered by the Department of Internal Revenue. In the process of formulating it, the provisions related to common tax administration in the Income Tax, Value Added Tax and Excise Acts were integrated and codified in the initial section. In the final section, the substantive provisions related to income tax, value added tax and excise duty were included in separate sub-sections. In the process of formulating the Single Tax Code, old and irrelevant provisions were removed and new concepts were included in accordance with international practice. In addition, efforts were also made to simplify the structure and language, reduce cross-references and make it clearer.

एकल कर संहिता वा एकल कर प्रशासन/प्रक्रिया संहिताका लागि गर्नुपर्ने थप तयारी

सर्वप्रथम त ‘एकल कर संहिता’ वा ‘एकल कर प्रशासन/प्रक्रिया संहिता’ मध्ये कुन अपनाउने ? यो निर्णय गरिनुपर्छ । एकल कर संहिता लागू गर्ने निर्णय गरिए आयकर, मूल्य अभिवृद्धि कर, अन्तःशुल्क तथा अन्य साना, मसिना करहरूसम्बन्धी सारभूत प्रावधान र प्रक्रिया एउटै संहितामा समावेश गर्नुपर्छ । यस सन्दर्भमा पहिलो खण्डमा सबै करसँग सम्बन्धित साझा प्रक्रिया समावेश गरिनुपर्छ । दोस्रो खण्डमा विभिन्न करसम्बन्धी सारभूत प्रावधानलाई छुट्टाछुट्टै उपखण्डमा समावेश गरिनुपर्छ । 

‘एकल कर प्रशासन/प्रक्रिया संहिता’ रोजिएमा विभिन्न करसम्बन्धी सम्पूर्ण प्रक्रियालाई एकीकृत गरेर करका सारभूत प्रावधान छुट्टाछुट्टै ऐनमा राख्नुपर्ने हुन्छ । जुन विकल्प रोजे पनि नेपालको कर प्रणालीलाई आधुनिक बनाउँदै अन्तर्राष्ट्रिय असल अभ्याससँग मेल खाने बनाउनुपर्छ । कर कानुन सुधारको मूल लक्ष्य स्वदेशी तथा विदेशी लगानी आकर्षित गर्ने, व्यापारिक वातावरण सुधार गर्ने, राजस्व वृद्धि गर्ने र अन्ततः समग्र आर्थिक विकासमा योगदान पुर्‍याउने हुनुपर्छ । 

कर संहिताको मस्यौदा तयार भएपछि त्यसबारे व्यापक सार्वजनिक परामर्श गरिनुपर्छ । र, यसबारे राष्ट्रिय सहमति कायम गरिनुपर्छ । 

मस्यौदा अन्तिम भएपछि यसलाई विधेयकका रूपमा व्यवस्थापिकामा पेस गर्नुपर्छ ।  सांसदहरूलाई यसको संरचना, औचित्य र राजस्व तथा अर्थतन्त्रमा पर्ने प्रभावबारे विस्तृत प्रस्तुति दिनुपर्छ ।

त्यसपछि यसबारे ब्रोसर, पम्प्लेट, प्रकाशन, मिडिया कार्यक्रम तथा डिजिटल सामग्रीमार्फत व्यापक जनचेतना अभिवृद्धि गर्नुपर्छ । करदातालाई कर लेखा, विवरण पेस, कर भुक्तानी र कर फिर्ता जस्ता विषयमा विस्तृत तालिम दिनुपर्छ । साथै, राजस्व प्रशासनका कर्मचारीलाई मात्र नभई महान्यायाधिवक्ता कार्यालय, महालेखा परीक्षकको कार्यालय, अख्तियार दुरुपयोग अनुसन्धान आयोग, राजस्व न्यायाधिकरण तथा अदालतका कर्मचारीलाई पनि कर संहिताबारेमा प्रशिक्षण दिइनुपर्छ ।

यस संहिता प्रभावकारी कार्यान्वयन गर्न आवश्यक पूर्ण तयारी गरेर मात्रै लागू गरिनुपर्छ । 

प्रादेशिक तथा स्थानीय कर कानुनमा सुधार

कर कानुन सुधारको सन्दर्भमा प्रादेशिक तथा स्थानीय कर कानुनहरू पनि अद्यावधिक गर्न आवश्यक छ । हाल यी तहका सरकारका लागि ‘स्थानीय तहबाट कर तथा गैरकर राजस्व लगाउने र उठाउने सम्बन्धमा बनेको नमुना कानुन’ र ‘प्रदेशसभाबाट कर तथा गैरकर राजस्व लगाउने र उठाउने सम्बन्धमा बनेको नमुना ऐन’ जस्ता नमुना कानुनहरू लागू गरिएका छन् । साथै, अन्तरसरकारी वित्त व्यवस्थापन ऐन र राष्ट्रिय प्राकृतिक स्रोत तथा वित्त आयोग ऐन पनि केही हदसम्म प्रादेशिक तथा स्थानीय कर व्यवस्थासँग सम्बन्धित छन् ।

२०७३ र २०७४ मा म छुट्टीमा नेपाल आएका बेला मैले यी चार वटै कानुनको मस्यौदा तयारीमा अर्थ मन्त्रालयलाई सहयोग गरेको थिएँ । यी कानुन लागू भएको ८ वर्षभन्दा बढी समय बितिसकेकाले तिनीहरूलाई समसामयिक आवश्यकतासँग मेल खाने गरी पुनरावलोकन र अद्यावधिक गर्नु आवश्यक भइसकेको छ ।

निष्कर्ष

वर्तमान आयकर, मूल्य अभिवृद्धि कर, अन्तःशुल्क र भन्सार महसुल छुट्टाछुट्टै ऐनहरूअन्तर्गत लागू गरिएका छन् । साथै विभिन्न साना, मसिना कतिपय करहरू आर्थिक ऐनमार्फत लागू गरिएका छन् । यस अतिरिक्त करसम्बन्धी प्रावधानहरू विभिन्न क्षेत्रगत ऐनमा पनि छरिएका छन् । यस्तो खण्डित कर कानुनी व्यवस्थाले असंगति सिर्जना गर्छ, पारदर्शिता सीमित बनाउँछ र करदाता तथा सरोकारवालालाई कर प्रणाली बुझ्न अनि पालना गर्न कठिन बनाउँछ ।

करसम्बन्धी विभिन्न प्रावधानलाई एकल कर संहितामा समेट्ने हो भने कर प्रणाली धेरै सरल, स्पष्ट र पारदर्शी बन्न सक्छ । यसले एकीकृत कानुनी ढाँचा प्रदान गरी अन्योल र फरक–फरक व्याख्यालाई घटाउँछ तथा कर परिपालन र प्रशासनिक लागत कम गर्छ । लेखा, कर निर्धारण र विवाद समाधान जस्ता प्रक्रियालाई पनि सरल र व्यवस्थित बनाउँदै प्रणालीलाई अझ प्रभावकारी र पहुँचयोग्य बनाउँछ ।