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Chapter 4

Emerging Challenges to Tax Management

This section will include an in depth look into the results/findings of the research to
determine the emerging challenges to tax management in Nepal. This research used an unstructured
interview involving with the participants of the study in an open-ended questions so as to open the
discussion about the prevailing issues and the possible challenges to Tax Management in Nepal. The
purpose of the unstructured interview was to tally the derived challenges and remain open to any
new perspective derived from the open conversation.
The results are based on 3 perspectives, namely (a) Public Perspective, (b) Business
Perspective, and (c) Governmental Perspective. The results provide an overviewed insight about
the current situation and mainly focusing on the country’s Tax Management Challenges as viewed
by the 3 bodies. These results are qualitative in nature because it provides us the challenges derived
from the individual participants as of their critical analysis of the situations.
Public Perspective
For the public perspective, we interviewed our individual parents and friends, so as to get
information about what could the challenges to the tax system be by their analysis of the current
situation of the nation
Tax Evasion
Each and every interviewee complied with this challenge to Tax Management. As of one of
our classmate, Mr. Prayash Aryal,’s analysis our country’s citizens didn’t have proper awareness
about tax-laws, estimating about 10% of the population being unknown to the tax provision and
rest of the percentage (90%) of the population knowing about the provisions and yet, evading taxes
due inadequate enforcement of the law through under invoicing. Besides, Mr. Kushal Khadka, Ms.
Prerana K.C. and Mr. Sudeep Sing Bhardwaj, BPh students of Nobel academy stressed upon the
willingness of the public to pay the tax. That is, the country’s tax system is not transparent enough
to be able to view clearly, how the tax is managed in the country so as creating a feeling of
underutilisation of the tax-collected amounts, which matched the analysis of Mr. Lilamani Pokhrel
and Mrs. Shashi Shrestha, Social Activists, that the government presents a culture of over filing the
usage of tax-collections and causing a leakage in the system whereby the collected amount is not
reaching the infrastructural development, thus, creating a public mentality of the improper
utilisation of tax-collection.
Upon probing the conversation towards the tax evasion performed by the businesses, the
public perspective collectively voiced the under-billing practised by the businesses, such that the
transaction amount is under billed, so as to show less of a taxable income, thus, evading from the

Besides. with lack of specificity. it is one hectic and lengthy process to get things done in governmental activities. Mr. having extra leaves. that the government earns from the individual taxpayers. First of all. each and every participants who had gone though the tax laws. only differing in the volume. Prerana K. although amendments in the factor such as tax rates and public benefits through the income tax. the figure of the CPI can provide us an insight of how our administrative facility is. etc. Besides. Besides. Accountability Factor . for the average income earning group. that we look for personal development rather that nation’s development and hence. Also. Other participants also voiced on the fact that the administration department of the each and every governmental organisation. 25% tax levied on the income above Rs. and hence. sharing the mentality. and thus. leading to dedication to personal gains. Administration and Inefficient Staffing Our country. the participants stressed that although the nation has a wide-range covering but vague laws. hindering the positive benefits fro the nation and the public. added that the system of the Nepal is such that. these officials are also a part of the public. that individual would be the first one to get sacked for complying with the law and not the system. This shows the public mentality of the nation. by large taxpayers through “Tax Planning”. is required. Public Awareness. legally evading the taxes applicable. they would be willing to pay the taxes. has a trend of Corruption. as of the Corruption Perception Index of Transparency International. stated that the laws were not clear. also mentioned that the laws are vague. 2015 falls in the 126th position with 29 score out of the total 100. Kushal Khadka. most of the individual involving in personal development through abuse of Governmental posts. few of the participants also stated that the tax evasion is being done deliberately. Besides. if an individual knows people. not having a fair communication process. stressed that not all the Nepalese Government worker are involved in corruption activities. 350000 (Singles) and Rs. that if an individual follows the rule and laws. Mentality and Tax Rates As of the interview sessions with the individuals. but with vague and double-meaning sentences. with huge dissatisfaction towards the usage of the taxed income. which were if put into action would yield better results to the tax management of the nation. which is actually a legal process. Ms. but also backed up by their concern. minor issues such as leaving the office before time. In this. there were a few of them who knew about the tax rates applicable to the income generated. and the individuals who don’t know about the policies are cheated upon by the law itself.C. And. which each and everyone of us have it on us. we also received an insight that such corrupt administrative bodies don’t let the not-corrupt body do their jobs properly. Now. suggested that if the tax rates were lowered. because there are group of people who don’t even know how they are being taxed to their income. whereby the accountants focus on the loopholes of the Tax Laws. issues show a lack of dedication towards work by the governmental post holders. the participants. and hence. from the participants. however covering the a huge area of tax. but most of them amounts. The complexity of the tax laws creates an ambiguity amongst the tax-payers. Law and its Enforcement Another point that all the participants put a collective voice to. his/her work will be done or else. causing complexity in understanding for the public. This issue was also mentioned by the participants. Thus. 400000 (Couples) was considered to be high. was about the enforcement of law.

such tax is also not being paid. wholesale dealer at New Road. A Tax office letter is required for releasing the Retention money. tax-approved throughout the country. He suggested the nation to have a centralised tax policy. bill is not given. with ambiguity in the concept of tax provisions. Thus. who is also involved in a co-operative institution. Business Perspective For analysing from the business viewpoint. which causes the business houses to have bills so as to Transparency issues and Concern of ambiguity Black Market Tax Rates Administration and vague Law Enforcement Unfair taxation practises and Corruption. such that general public is unable to participate in the management process. Chandralal Shrestha. whereby if a single product is taxed at a certain location becomes. which is not done properly. Inadequate State Provisions Governmental Perspective Tax Evasion Starts with each and every household by evading 10% Rent Income Tax. the concept of ambiguity in tax l Impractical Tax laws Governmental Product Pricing Also.Participants also mentioned that there no actual accountable body to transparently reflect the government’s activities from the tax-collections. Backing up the statement. boost the economic activities in a simple manner with transparency. ambassador income tax of which 75% is exempted. . he mentioned about VAT practises. so as there is no record of the transaction. whereby the importers are to pay series of taxes at various departments. Billing issue. They gave instances about NEA staffs not needing to pay the electricity bills. we interviewed Mr. Tax Evasion The issue face by the business houses as of the analysis made by Mr. 25% taxable. rather the system is imposed upon the public. which would provide a basis for the businesses houses to not involve in the factor of ambiguity in relation to taxation and hence. there is an issue in governmental product pricing. Chandralal Shrestha was that Nepal has impractical law system.

army troops deployed to customs area during Janayudhha refused to return from there after the end of the JY Instance about Janakpur Cigarette factory about to dissolve due to the corruption factor NA 1958 and Thai air found in 1960. the corruption could be seen from the development of the National airlines over the years with NA having 2 airbus at present. Every individual educational background gets to work for tax office. The two individuals stated that the governmental perspective of challenges in tax management and the citizen’s perspective is the same. Dairy company ma karma carne le dude sitar ma khan parce prawriti NOC employees getting 20 litres of fuel although they don't own a vehicle. Data Intern Program with KU and Government .Black Market Tax Awareness Practise of the tax knowledge Ineffective Law Compliance due to complexity requiring law reforms Unstable Political System and Corruption An instance whereby. Income Transfer Inefficient and Ineffective staffing Work not presented properly. This showed existence of a level of governmental staff ineffectiveness and inefficiency in work as well.