Export sector is emerging as a crucial component of Nepal’s economy.

In order to boost exports, there is a need to set up sector-wise specialized economic zones (SEZ)for exporting to India, Tibet, tourism zones in places like Ilam etc. Fund for customized incentive packages to locals and for infrastructure costs can be raised through bonds.

We must undertake public expenditure on selected mega-infrastructure projects like alternate link roads to Birgunj from Kathmandu; East West rail link; Public Transport Service for Kathmandu Valley; development of satellite towns around Kathmandu, Biratnagar and Birgunj.

Similarly, construction of international airport at Lumbini would be needed to boost tourism. Fund 8 percent tax free 10-years project specific bonds and foreign currency bonds for NRN and Nepalese working abroad (NWA) in order to ensure sustained economic activities on the along term basis, encourage private sector investments in supply and manufacture of allied goods and services as well as generate large-scale employment opportunities even during a sluggish economic period.

Inject life into capital market through facilitating growth of the stock exchange by disinvesting shares of profit making public sector enterprises like Royal Nepal Airlines Corporation, Nepal Telecommunication Corporations, Nepal Electricity Authority, Nepal Oil Corporation (NOC) etc, through the stock exchange to strengthen the capital market.

Introduce special power tariff for industries. We have one of the highest power tariff rates in the region. The high cost of energy renders our products uncompetitive. Keeping in mind the huge excess supply of power, tariffs should be slashed to encourage greater consumption of electricity as well as make the cost of production of our products competitive.

Custom duty on raw materials and packaging materials must be pegged at the minimum slab rate. In some cases duty on raw materials and packaging materials are even higher than finished products. An import duty of only 1 percent should be levied on all (capital goods including plant, machinery, equipment and instruments used by industries).

Export duties should be scrapped. Bonded warehouse facilities for exports to India should be transparent.  A maximum ceiling on income tax on profits on export earnings should be fixed on the basis of transaction value.

In order to reduce the cost of transaction, tax on scrap (Kawadi tax) as well as tax levied by local bodies on outbound goods and reusable goods, which are sometimes higher than custom duties, should be immediately scrapped. Vehicle movement fees charged by them should be levied on an annual basis instead of movement-to-movement basis.

Keeping in view the present state of the economic activities and investment shyness, the dividend tax should be scrapped to improve the corporate investment climate.

In order to streamline the workings and decision making process of all the revenue related departments, there is a need to introduce transparent, efficient and discretion free functional expertise. The thresh-hold on VAT, except for a few designated essential items, should be removed to make the system universally acceptable.

The current system of custom valuation on discretionary basis, which in itself is contrary to the spirit of VAT, is causing a lot of anomalies and difficulties. Therefore, the process of valuation at custom points for industries should be based on the value of the invoice.

The income Tax Act 2058 promulgated by the government is very complicated and ambiguous, discretionary as well as impractical and therefore should be immediately revamped.