Nepal's VAT Collection Exceeds Target as Consumer Reward Scheme Boosts Tax Compliance

Nepal's Inland Revenue Department has reported an encouraging improvement in Value Added Tax (VAT) collection after introducing a reward scheme that encourages consumers to demand bills from sellers. During the first three months of FY 2083/84, VAT collection reached Rs. 41.04 billion, representing 101.08% of the target of Rs. 40.61 billion. This marks a 10% increase compared to Rs. 33.75 billion collected during the same period last fiscal year. In Ashoj alone, VAT collection reached Rs. 13.07 billion, achieving 103.43% of the monthly target. Under the scheme, the government plans to spend around Rs. 80 million on rewards for consumers and sellers. Every 15 days, 15 consumers receive Rs. 100,000 each after tax deductions, while one bumper prize winner receives Rs. 750,000 after tax deductions. Sellers associated with winning consumers will also receive cash prizes. According to Inland Revenue Department Director General Dr. Bhishma Kumar Bhusal, increased consumer demand for bills has encouraged businesses to issue bills more regularly. Linking digital payment records with the Central Billing Monitoring System (CBMS) has also helped improve transaction monitoring. However, tax experts and economists have cautioned that the reward scheme alone cannot ensure long-term tax reform. They have emphasized the need to review VAT rates, gradually lower the current Rs. 5 million VAT registration threshold and strengthen monitoring to prevent tax evasion. Meanwhile, small retailers have raised concerns about the additional administrative burden, particularly during busy business hours. Experts have also called for practical support for smaller businesses with limited financial resources, technology and manpower.