Tax collection inevitable to fulfil state’s financial liabilities: FinMin



Finance Minister Yubaraj Khatiwada today said that the government is under severe financial crisis amid low revenue collection as a result of which the government is under extreme pressure to cover state operation expenditures.

Addressing questions raised by lawmakers on the Economic Bill for fiscal year 2020-21 which was passed by the House of Representatives today, Khatiwada said the government requires almost Rs 40 billion a month for state operations while low revenue collection in the recent months have made state operations more challenging.

“There is a huge gap between revenue collection and state expenditure from mid-May to mid-June. As a result of different obstacles in tax collection due to the spread of COVID-19, the monthly revenue collection in recent months stands at merely Rs 15 billion while expenditure is over Rs 40 billion,” he informed.

Due to low revenue collection, Khatiwada said that recurrent expenditure under different headings including salary payment of civil servants has been affected. As a result, he informed that the government is mulling over mobilising resources from different funds to meet the recurrent expenditure demands.

“As the government is being unable to fulfil recurrent expenditure liabilities through revenue collection, we are compelled to use resources of different government funds to maintain state operation intact,” the finance minister added.

Amid the government already facing resource crisis due to low revenue collection, a recent verdict of the Supreme Court which has directed the government to collect taxes from businesses only one month after the lockdown is completely over has added financial pressure on the government.

Though the Ministry of Finance had asked businesses to clear all tax dues within June 7, it had extended the tax payment deadline till June 21. However, the recent direction from the apex court means that businesses are not obliged to clear taxes within the given time and the government is expected to face severe financial crisis.

“There are no options other than to collect pending tax dues from businesses to meet different financial liabilities of the government,” said Khatiwada, adding that the government will basically use resources of government funds that are inactive.

The government is also focusing on internal borrowing to meet its financial liabilities. As of today, the government has collected Rs 165 billion through internal borrowing. However, collecting large amount of internal borrowing is also taken as wrong as doing so will directly affect the flow of credit from banks and financial institutions to the business community.

A version of this article appears in e-paper on June 15, 2020, of The Himalayan Times.

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