Stakeholders criticize government for imposing unfair taxes in new budget

KATHMANDU: Finance Minister Barsha Man Pun has repeatedly stated that there have been minimal changes in tax rates in the budget for FY 2024/25. However, stakeholders have criticized the government for imposing what they deem to be unfair taxes on various items through the budget.

The government has introduced a 10 percent advance income tax on the import of pulses and legumes. These food items, already subject to a 10 percent customs duty, will see inflated prices due to the added tax, affecting consumers directly, traders said.

Kumud Kumar Dugad, President of the Association of Nepalese Rice, Oil, and Pulses Industry, stated that the additional taxes on these raw materials will significantly increase food prices in the market. “This will adversely affect around 35 firms that have invested Rs 35 billion, making everyday food items dearer for the country’s citizens,” Dugad said.

The budget also proposes a 2.5 percent advance income tax on imported paddy, while the government already charges a five percent agriculture reform fee on it. “With the Indian government imposing a 20 percent tax on the export of its paddy, the added tax will further escalate the price of basic food items in the domestic market,” Dugad added.

Furthermore, the government faces criticism for raising taxes on electric vehicles. The annual budget has increased the customs duty on eco-friendly cars by up to 20 percent. Speaking at the parliament on Tuesday, Rastriya Prajatantra Party Chairman Rajendra Lingden termed the increased taxes on electric vehicles unfair. “The Finance Minister is advised to reconsider and possibly retract this decision,” Lingden said.

The budget also doubles the customs duty on imported sponge iron, a raw material for steel manufacturing, to two percent. Additionally, imported scrap iron will now incur a one percent customs duty, up from zero percent. Conversely, the government has scrapped the Rs 2,500 per ton excise duty on imported iron billets, now requiring importers to pay only five percent in customs duty.

Anjan Shrestha, Senior Vice-President of the Federation of Nepalese Chambers of Commerce and Industries, stated that the new policy would negatively impact extraction-based iron manufacturing industries. “It will benefit only those manufacturing groups that provide very little value addition to the country,” Shrestha said.

In defense of the new budget, Finance Minister Pun argued that the provisions are designed to promote production sectors. “The new provisions will help make economic activities more vibrant. The budget is not distributive but is more production-oriented,” Pun said, speaking at a National Assembly meeting on Tuesday.