LOGIN DASHBOARD

    Explainers

    5 MIN READ

    Finance minister overstates health sector allocation, makes wrong claim about Nepal’s income tax regime

    Deepak Adhikari, June 10, 2020, Kathmandu

    Finance minister overstates health sector allocation, makes wrong claim about Nepal’s income tax regime

      Share this article

    Khatiwada spoke about the budget allocation for the health sector and income tax rates in Nepal. While talking about the two issues, he made false and misleading claims.

    
            Finance Minister Yuba Raj Khatiwada speaking at a post-budget press conference in Kathmandu on May 29.
    Finance Minister Yuba Raj Khatiwada speaking at a post-budget press conference in Kathmandu on May 29. (The Record)

    This article was originally published in South Asia Check – an independent, non-partisan, non-profit initiative by Panos South Asia, aiming to promote accuracy and accountability in public debate.

    On May 28, Finance Minister Yuba Raj Khatiwada unveiled a budget of Rs 1.47 trillion for the fiscal year 2020/21 in the Federal Parliament. Citing the COVID-19 pandemic, the budget was downsized by 3.8 percent from last year’s 1.53 trillion.

    On May 29, a day after presenting the budget, Finance Minister Khatiwada, who also serves as the government’s spokesperson, held a press conference at the Ministry of Finance in Kathmandu. He spoke about various aspects of the budget during the 45-minute press conference.

    In the course of his presentation, Khatiwada spoke about the budget allocation for the health sector and income tax rates in Nepal. While talking about the two issues, he made false and misleading claims.

    South Asia Check has fact-checked his claims.

    First claim

    “The budget allocation for the health sector this year is up by almost a third. As you see this is my third budget, and during these years the budget allocation for the health sector has doubled. It is a good thing.”

    According to the expenditure estimates of this year’s budget, a total of Rs 115.06 billion has been allocated for the health sector. In 2019-20, this amount was Rs 78.40 billion. And in the fiscal year 2018/19, health sector received Rs 65.34 billion. Khatiwada was right when he said this year’s allocation is a third more than last year’s but he was wrong to claim that the allocation has doubled in the last three years. For this he should have allocated Rs 130.68 billion for the health sector. In other words, he should have allocated an additional Rs 15.62 billion.

    Second claim

    “Our income tax rates are competitive in South Asia. Whether it’s institutional income tax or personal (income tax).”

    We found that the minister’s this claim is also wrong. After a comparative study of income tax rates in South Asia, we found that Nepal’s personal income tax rates are among the highest in South Asia. Personal income tax rates range from 1 percent to 36 percent in Nepal. No other country in South Asia levies a personal income tax of 36 percent.

    In Nepal, an individual with a net annual income of Rs 400,000 needs to pay 1 percent (social security) tax.  The income tax rate is 10 percent on annual income of up to Rs 500,000 and 20 percent on income up to Rs 700,000. A 30 percent tax is levied on personal income exceeding Rs 700,000.

    Read also: Video clip of anti-India demonstration being circulated on social media is six months old

    India does not tax personal income of up to Rs 800,000. Indians pay only 10 percent tax on annual income of up to Rs 1.2 million; 15 percent on income of up to Rs 1.6 million; and 20 percent tax on income of around Rs 1.9 million.

    In Bangladesh, annual income up to Rs 350,000 is not taxable. Income tax is 10 percent on Rs 570,000; 15 percent on income up to Rs 712,000; 20 percent for Rs 855,000 and 25 percent for up to Rs 4.2 million.

    Similarly, annual income of up to Rs 444,000 is not taxed in Pakistan. Similarly, a five percent tax is levied on income ranging from Rs 444,000 to Rs 888,000.

    In Sri Lanka, annual income of up to Rs 300,000 is exempt from tax. The island nation levies a 4 percent tax on an annual income of Rs 391,000. The government charges tax at progressive rates of 8, 12, 16 and 20 percent for each income slab of Rs 391,000. Bhutan recently increased the threshold for income tax relief to Rs 480,000 from Rs 320,000.

    In an article published on news website www.onlinekhabar.com, Rup Khadka, who headed the High Level Tax System Review Commission, set up to recommend reforms in Nepal’s tax system, said Nepal’s income tax rates were among the highest in South Asia. “Nepal’s average personal income tax rate is much higher than any other SAARC (South Asian Association for Regional Cooperation) country. This is not good for the country’s economic growth. The tax burden should be fixed comparatively,” he said, adding, “Since Nepal is a landlocked country with relatively small economy, from the viewpoint of economic development it is not appropriate for Nepal to impose taxes higher than that of India, Pakistan and Bangladesh.”

    After a comparative study of the income tax rates of South Asian countries and based on the comments of a tax expert, we have concluded that Finance Minister Khatiwada’s claim that Nepal’s income tax rates are competitive in South Asia is also false.

    :::::::::::

     



    author bio photo

    Deepak Adhikari  Deepak Adhikari is the editor of South Asia Check, a fact-checking organization.

      



    Comments

    Get the best of

    the Record

    Previous Next

    YOU MAY ALSO LIKE

    Features

    5 min read

    Paternalistic and parochial: women decry new immigration rules

    Dewan Rai - February 10, 2021

    Proposed new rules will make it mandatory for women travellers to obtain permission from their families and the local government.

    Features

    7 min read

    Here’s what the drafters of the constitution have to say about the prime minister’s action

    Bhadra Sharma - January 17, 2021

    With formal hearings at the Supreme Court regarding the constitutionality of Oli’s dissolution of the House beginning, The Record spoke to the writers of the statute for their take on possible interpretations.

    COVID19

    News

    3 min read

    Covid19 Roundup, 18 May: Covid19 cases rise to 357 as government deploys army to enforce lockdown

    Record Nepal - May 18, 2020

    A daily summary of all the COVID19 related developments that matter

    COVID19

    7 min read

    Navigating the post-corona world

    Rubin Ghimire - May 4, 2020

    Dignified regional cooperation is the need of the hour and self-reliance the major goal

    COVID19

    Features

    10 min read

    Lessons from Nepal’s trade performance during the Covid-19 pandemic

    Ram Narayan Shrestha - January 15, 2021

    To get on the path to sustained economic recovery, Nepal will need to develop trade mechanisms that have been re-calibrated to meet the needs of the changed global context

    Interviews

    10 min read

    “My poems and plays are usually meant for social repair”- Lekhnath Poudel

    Uttam Kunwar - February 27, 2020

    During my time, writing was considered almost sinful. But I still wrote.

    COVID19

    3 min read

    Fact-checked: WHO hasn’t revised coronavirus risk level for Nepal

    Injina Panthi - April 28, 2020

    A dozen media outlets in Nepal have published news claiming that the World Health Organization (WHO) has removed Nepal from the list of countries at high risk of COVID-19.

    COVID19

    News

    3 min read

    Covid19 Roundup, 19 April: Covid19 in over 1,000 Nepalis abroad and more

    The Record - April 19, 2020

    A daily summary of Covid19 related developments that matter

    • About
    • Contributors
    • Jobs
    • Contact

    CONNECT WITH US

    © Copyright the Record | All Rights Reserved | Privacy Policy