Nepal's Finance Ministry Prioritizes Private Sector to Drive Economic Growth

Nepal's economy is currently at a critical juncture. With the formation of a new government, the country has gained leadership characterized by fresh thinking, enthusiasm, and urgency. The average age of the Council of Ministers being around 40 confirms our zeal and integrity to do something new.

Against this backdrop, the Ministry of Finance is in the final stages of preparing the budget for the upcoming fiscal year 2083/84. Our main priority in budget formulation is to place the private sector in the front seat and stimulate economic activity.

Private sector investment and assets are not just individual property; they are national assets. When a businessperson conducts trade, the 25 to 39 percent tax paid to the government, employee salaries, and profits to shareholders ultimately strengthen the state treasury and the economy.

Therefore, the state should not discourage businesspeople but rather boost their morale. We must adopt a policy where the private sector holds the steering wheel of the economy, and the government acts only as a facilitator.

It is a fact that there has been some delay in the payment of arrears for programs announced to promote exports in the past. Although difficulties arose due to the inability to receive details from the Ministry of Industry on time and budgetary constraints, the Ministry of Finance is committed to clearing these arrears.

In the coming days, we are preparing to move towards production-based incentives rather than traditional subsidies. We believe this will directly benefit actual producers and increase exports.

We have decided to repeal or amend about 15 cumbersome and outdated acts. We are determined to improve the working style of the Department of Revenue Investigation and tax administration. Our policy is not to cut off a finger just because it wrote something wrong, but to teach the finger to write correctly.

We have initiated internal reforms to make revenue administration virtuous and professional. With the implementation of an online valuation system at customs, we expect to reduce the cost of doing business and expand the tax base.

To increase capital expenditure and attract private sector investment in the country, there is a need to improve existing laws related to procurement, land acquisition, forests, and the environment. The Ministry of Finance has formed a task force to remove hurdles in these laws.

We will create an environment where businesspeople can invest without fear. The government's policy is focused on expanding the tax base rather than increasing tax rates. We believe in voluntary tax participation. The administration will facilitate an environment where taxpayers themselves honestly declare their taxes.

At the same time, we have already written to remove additional taxes imposed by provinces on Indian vehicles, as the federal government has sole jurisdiction over national highways and international trade.

Additionally, we have issued necessary instructions to resolve the confusion regarding the cash (5000 dollars) that Indian tourists can bring at border crossings.

The upcoming budget will address the legitimate demands of the private sector. Sufficient liquidity in banks, low interest rates, and low inflation indicate that the time is right for investment. The Ministry of Finance is ready to walk together on the journey of economic prosperity by giving the private sector the front seat and the steering wheel.

We implement what we say. If something cannot be implemented, we are ready to provide an answer with clear reasons. It is only through the support of the private sector and the policy clarity of the government that it is possible to make Nepal prosperous.

(Upadhyay is the Finance Secretary. This is an edited excerpt of the speech delivered by Finance Secretary Upadhyay at a program held in Biratnagar.)