ANALYSIS OF VALUE ADDED TAX SYSTEM IN NEPAL

Abstract

The conducted field survey shows there are many problems on this field. Level of awareness of the accountant and businessperson paying VAT is at low level on some provision of VAT Act. Their knowledge is very important so that proper use and implementation of VAT system can be ensured. Likewise, revenue administration has various issues that can be improved with good attitude of people. For example, making tax payer friendly environment at tax office and giving enough respect to the tax payer can improve the image of tax officer also. The reasons are poor planning, unaccountable staffs, weak and corrupt bureaucracy etc. corruption is widely spreading in political as well as administration from top level to bottom level of authority. People are less literate about theoretical concept of VAT, so they cannot play creative support for the implement of VAT. It is necessary for the taxpayers to know that the VAT with its benefit. Different education programs, seminars etc. should be organized for taxpayers as well as general public in all over the country with the objectives of aware them about VAT which helps to bring more and more tax payers in the tax circumference. The internal revenue is sometimes in sufficient even to meet regular expenditure and most of the development activities depend on foreign aids where Nepal has been compelled to harmonize the donor. The major problems of domestic resource mobilization are poor utilization of the poor natural resource base, small and stagnant industrial sector, poor economic growth and inadequate tax effort etc. So, in this context, revenue generation from internal sources is very important in which income tax is one of the major sources and it is considered as a good remedy to cure growing resource gap problem in Nepal. Income tax was introduced in the FY 1959/60 and the percentage of income tax to the government revenue is in increasing trend at present but it is not regarded as satisfactory in comparison to other developing countries. Due to the various problems related to income tax, revenue collection from income tax is low in Nepal. It is thought that Nepalese income tax is not appropriate enough and the administration is worse.