Supporting the Tax Authorities

Project description

Title: Supporting the Tax Authorities in Nepal
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Nepal
Lead executing agency: Ministry of Finance, Inland Revenue Department (IRD)
Overall term: 2013 to 2017

Context
Collecting higher state revenues from taxes and managing these efficiently are essential to Nepal’s social and economic development. Efficient tax administration is necessary for the state to provide poorer segments of the population in particular with public goods such as health services and education.

At just 16 per cent of the gross domestic product, Nepal’s tax revenues are among the lowest in the whole of South Asia. A few large companies (around 790) account for approximately the half of the tax revenue. The cost incurred by taxpayers as a result of complying with tax laws is disproportionately high, particularly for small and medium-sized enterprises. There is an urgent need for simplified taxation processes, better service offerings and comprehensive information and educational work to reduce these costs.

Objective
The Nepalese tax authorities collect state revenues efficiently and with due consideration given to the economic environment.

Approach
The project cooperates with actors at central state and district levels and provides advisory services to the tax authorities in three areas:

  1. Information and communication technology (ICT)
  2. Taxation of small and medium-sized enterprises and raising of taxpayer awareness
  3. Support for management processes
The project is being cofinanced by the Danish International Development Agency (DANIDA).

Results achieved so far
The project is contributing to positive developments at macroeconomic level and is helping the state to increase its revenues.

The number of income tax returns submitted increased by over 70 percent between fiscal year 2009/10 and fiscal year 2012/13. State income from taxes collected centrally increased by around 20 percent in fiscal year 2012/13 compared with the previous year.

The tax authorities possess a relatively well-developed IT infrastructure. Improvements in ICT have made it easier to submit income tax returns. One example of this is improved access to sources of information such as FAQ, call centres, handbooks and national online services.

E-services provide improved access to relevant data and increase data transparency. In 2012, 94 per cent of income tax returns and 98 per cent of VAT returns were submitted electronically.

A total of 1,200 tax authority employees have been given training in a range of different areas relating to tax and customer orientation. This has helped them to improve the services they provide and advise taxpayers more competently.

The collation and processing of material and empirical data facilitate the implementation of wide-reaching informative and educational campaigns using tools such as the taxpayer education toolbox, manuals on interpreting tax law, comprehensive brochures on a range of tax issues and TV clips. The campaigns ensure transparency towards taxpayers and enable them to view the tax authorities in a positive light.

Contact

Ellen Kallinowsky
ellen.kallinowsky@giz.de