Nepal mulls banning small importers for better monitoring tax evasion

A proposal to ban small importers and only allow businesspeople with good financial credentials to import has sparked anxiety in Nepal’s business community

Jul 16, 2021
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Nepal

A proposal to ban small importers and only allow businesspeople with good financial credentials to import has sparked anxiety in Nepal’s business community. The panel which suggested it argued that it would make monitoring easier and help check tax fraud. Legal experts, however, said it would violate the rights of small importers to do business. 

The Nepal Revenue Advisory Board has suggested issuing import licenses only to those individuals or firms that can import goods valued over a certain threshold annually. By limiting the number of importers, the board said, it will be easier to track their shipments, transactions, and detect tax evasions. 

In 2019-20, there were a total of 21,683 people/firms involved in importing goods. Most among them were small traders which had imported goods worth as little as $14, according to a report in The Kathmandu Post. Furthermore, the practice of an individual registering several small firms, collecting huge tax liability, and then closing these firms to evade taxes is also widely prevalent. 

For instance, in 2019-20 alone, the government lost a whopping $62 million where firms registered under different names vanished with huge liabilities. Plugging the leakage of the revenue is currently a major concern for the government. 

However, banning small importers will affect the local economy in the border regions. Districts along the border with India have a huge number of small importers, and the move will hurt their livelihood. 

“We want to make sure that only genuine people are in the business so that illegal activities can be controlled and revenue losses reduced,” Ram Prasad Acharya, the director of the Department of Revenue Intelligence, was quoted as saying by The Kathmandu Post. 

He further added the banning wasn’t the issue, leakage should be stopped.  

The recommendations may infringe on the constitutional rights of individuals to engage in trade, legal experts argued.  Article 17 of the constitution ensures that Nepali citizens have the freedom to practice any profession, carry on any occupation, and establish and operate any industry, trade, and business in any part of Nepal.

(SAM)