Taxation : Basics

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1 year ago

Tax/ Taxation/ (देवनागरी: कर meaning in one sense a royal revenue, toll, tax, tribute, duty in samskrit)

The first record of organized taxation comes from Egypt around 3000 B.C. Taxes have been collected in Nepal, India and the Indian Sub- Continent from thousands of years as a way of funding the state to maintain welfare state in the nation, maintain defense of the kingdom, recruit armies, and prepare forts, etc.

If tax is levied directly on the income or wealth of a person and the burden of the payment of tax cannot be shifted to other person, then it is Direct Tax. The payment of such tax ‘pinches’ the taxpayer. For example: Income Tax, Integrated Property Tax collected by Local Governments

If tax is levied on the price of a good or service, then it is called an indirect tax where the burden of payment of the tax is shifted from manufacturer to various level of sellers to the ultimate consumer. For example: Customs Duty, Excise Duty, Value Added Tax, Health Service Tax, etc.

How can Government levy tax?

The Government’s power to levy tax is derived from Article 115(1) of the Constitution of Nepal, 2072. The Article provides, no taxes and duties shall be levied and collected except than as per the law.

Now, a small glance over some taxes and duties collected in Nepal and their governing laws: Income Tax is levied as per the Income Tax Act, 2058 Infrastructure Development Tax, Agricultural Improvement Duty, Health Risk Tax, Road Construction Duty, Road Repair and Improvement Duty, Cinema Development Duty, Pollution Control Duty, Telephone Ownership Duty, Telecommunication Service Charge, Casino Royalty and Forest Yields Fee are levied and collected annually as per the Finance Act passed from the Federal Parliament.

House Rental Tax is levied and collected as per the Local Government’s Finance Act.

The recent increment of Infrastructure Development Tax from Rs. 5 to Rs. 10 per liter on import of Aviation Fuel, Petrol and Diesel with effect from 2076/11/15 was pursuant to Section 9(1) of the Finance Act, 2076.

Therefore, if a new type of tax is to introduced in the country, then the same has to be presented and passed in the parliament.

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