Former Finance Minister Rameshwor Khanal Suggests Budget Focus on Domestic Production and Tax Reform

Kathmandu. Former Finance Minister Rameshwor Khanal has stated that the government should present the budget for the upcoming fiscal year 2083/84 in a way that encourages domestic production. In a discussion about the upcoming budget organized by the Nepal Economic Journalists Society, he said that the budget should be focused on increasing productive capacity and reducing business costs.

According to Khanal, the government needs to make extensive reforms in the tax system in the upcoming budget. He stated that indirect taxes, especially excise duty and customs rates, need to be reviewed to make domestic production competitive with foreign goods.

He said that reducing such rates could have an immediate positive impact on revenue collection. He clarified that there is no alternative to the government adjusting customs rates on some goods to control the ongoing irregularities and tax evasion in foreign trade.

Khanal said that the presence of goods in the market without excise stickers and without paying taxes indicates significant deviation, and these activities are affecting revenue. He said that if this is controlled, it will not negatively impact revenue and will also provide relief to businesses.

However, he warned that it would be fatal for the economy to increase customs rates unrealistically in the name of merely reducing imports and increasing domestic production. Khanal stated that indirect and direct tax rates need to be reviewed to reduce business costs, increase productive capacity, and boost domestic production.

'There is a need to review customs tariff structures to support productive industries in order to increase domestic production and make them competitive with foreign products,' he said, 'Even if customs tariffs (tariffs) are reduced, a positive impact on revenue collection can be seen immediately. This is because, due to some taxes, irregularities have entered foreign trade, and incidents of tax evasion have also increased in domestic trade.' He argued that if customs rates are only increased with the ambition of reducing imports and increasing domestic production, it will harm the economy.

Regarding the size of the budget, Khanal made it clear that there is no need to present a budget of a large size that cannot be implemented to become 'popular' like previous governments. He said that to achieve the goals set in Rastriya Swatantra Party's manifesto, such as 7 percent economic growth, reaching a per capita income of 3 thousand dollars within 5 years, reducing poverty to 10 percent, and creating 1.5 million new jobs, the government must work together with the private sector.

To achieve these goals, he emphasized that the government must make the private sector a partner in practice, not just in speeches and manifestos, and that the government must rise above a control-oriented mindset.