Supporting Tax Authorities
Title: Supporting the Tax Authorities in Nepal
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Lead executing agency: Ministry of Finance, Inland Revenue Department (IRD)
Overall term: 2018 to 2021
In order to support its social and economic development, it is essential for a nation to produce revenue through taxation. This holds truer for developing nations, such as Nepal. The Government of Nepal has developed a roadmap to achieve one of the targets set by the Sustainable Development Goals (SDGs) which is to improve domestic capacity for tax and other revenue collection. Under the goal, the government aims to increase its revenue to GDP ratio to 30 per cent by 2030. One of the key objectives of the roadmap is to invest in taxpayer service measures. The Project works with the Inland Revenue Department (IRD) of Nepal in this regard, which is key to the roadmap, as it collects close to half of government tax revenue in Nepal. The Revenue Administration Support (RAS) project is a joint Nepal-German initiative under the guidance of IRD. The RAS project is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). The Project works with the IRD to promote reform-oriented tax policy and administration, thereby contributing to long-term fiscal sustainability and independence of Nepal.
The Programme is helping Nepal develop a more transparent, effective and service oriented tax system.
The project cooperates with actors at central state and district levels and provides advisory services to the tax authorities in four areas:
- Enhancing the audit capacities of tax officers
- Measures to reduce taxpayer’s compliance costs
- Improvements in IT security
- Public discussions about the Unified Tax Code
This project has been assisting the state to increase its revenue and has likewise been contributing in macroeconomic development of the country. The number of registered tax payers has increased from 1.49 million in 2015/16 to 1.8 million in 2017/18. The contribution of the total revenue in GDP has increased from 14.6 per cent in 2011/12 to 23.44 per cent in 2017/18.
The tax authorities have a well-developed Information Communication Technology (ICT) infrastructure. The improvements in ICT have eased the submission process of tax returns. The e-services provide improved access to relevant data and increase data transparency. The online tax registration and e-filing of tax returns hit 100 per cent in 2016/17.
To reduce the compliance costs to the taxpayers, as well as the costs of tax administration, the IRD has implemented electronic tax payments. The use of the electronic payment system for paying taxes has increased. A rigorous Audit of ICT system was carried out by independent consultants in 2016, and recommendations were implemented to reduce all types of risks.
The collated material and empirical data have been used to support some wide-reaching, informative and educational campaigns. The campaigns underpin the transparency of the system towards taxpayers, enabling people to view the tax authorities in a positive light. In response to the needs of small and medium-scale taxpayers, the tax payer education programme is being conducted in collaboration with IRD and FNCCI.