IMF urges Nepal to strengthen tax administration

TOKYO, Oct 13: Rising investors´ concerns over the fragile banking system and a possible decline in remittances from the Middle East has weakened domestic demand in Nepal, despite relatively strong private consumption, reckons Regional Economic Outlook released on Thursday by International Monetary Fund (IMF).



Highlighting concerns over the possible fiscal imbalance on the back of widening gap between revenue and expenditure, the report urged low-income Asian countries, including Nepal to put in efforts to broaden the tax base by plugging revenue leakages. [break]



In low-income countries (LICs) of Asia, like Cambodia and Nepal, significant revenue enhancement can be achieved by strengthening tax administration, says the report.



The report also raised concerns over continuing inflationary pressure in most of the LICs Asian countries and added that rising wage in some countries including Nepal has been one of the factors responsible for persistent higher inflation.



“Among Asian LICs, Nepal has the lowest pass-through -- a transmission process of International Prices into the Domestic commodities -- and highest degree of inflation persistence, stressed the report



Releasing the report, Anoop Singh, Director, Asia and Pacific Department of the IMF said Asian policy makers need to pursue a delicate balancing act between the fears of spillover from global growth and high inflationary pressure in much of the region. “Growth in Asia has moderated since the second quarter of 2011 mainly reflecting a weakening of external demand,” said Singh.



Against this background, there is a need for Asia make further progress with economic rebalancing and develop stronger domestic engines of growth, he said, adding, “In addition to structural reforms, this would require a reprioritization of fiscal spending in order to create fiscal space for critical infrastructure investment and social priority expenditure.



The Asian economic outlook underlined that the comprehensive reforms on financial, corporate and public sector that Asian countries have taken over the years have now started providing buffers for possible risks emerging from European debt crisis.



The report urged the Asian countries to adopt a strategy to arrest the worsening share of vulnerable households by introducing social safety and more investment in health and education.

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