Friday, July 22, 2016

Will govt refund tax collected since July 16

The government has to refund the taxes collected since the last one week – the beginning of the current fiscal year on July 16 – as Finance Bills presented by the incumbent government were rejected by Parliament today. However, the government can continue to spend as usual as the Appropriations Bill has already been passed.
"Since the Finance Bills have failed, the Periodic Tax Recovery Act, 1955 will become redundant, and the government has to refund tax collected under that Act," according to former finance secretary Rameshwor Khanal.
Though it has never happened before in the history of Nepal, the government has to refund the taxes collected since July 16, the beginning of the current fiscal year, following rejection of the Finance Bills by Parliament on Friday, he added.
The Periodic Tax Recovery Act 1955, which is meant to help the government continue to mobilise taxes, came automatically into effect from the day after finance minister Bishnu Prasad Poudel presented the budget for the fiscal year 2016-17 on June 28. And it would have been automatically superseded had the Finance Bills been approved by Parliament today.
The Periodic Tax Recovery Act, 1955 authorises the government to collect taxes for 6 months until the Finance Bills are duly approved by the House. "But when the Finance Bills are rejected, then the Periodic Tax Recovery Act also becomes redundant," he said, adding that any taxes collected under the said laws need to be refunded.
Chief of the Customs Department Shishir Dhungana, however, said that the government would now bring in a Periodic Tax Recovery Directive to help mobilise taxes from Sunday.
Parliament had scheduled approval of the corollary bills on July 13 as it had already approved the Appropriation Bill, paving the way for expenditures by the government from the beginning of the new fiscal year. But the incumbent government was reduced to a minority as one of the key coalition partners, CPN (Maoist Centre), withdrew its support on July 13. The Finance Bills then became uncertain.
The political tug-of-war that has left the fate of the budget uncertain is a historic blunder, Khanal added.
Nepal has seen many things – that it had never witnessed in its history – over the past decade, some good others bad. And as if that were not enough, the country could now also see a new budget altogether for the current fiscal year 2016-17 once a new government is formed.
With the House today rejecting the Finance Bills – including the Finance Bill 2016, the Bill to Mobilise Internal Loans, and the Loan and Guarantee Bill (21st amendment) – the future of the budget introduced by the Khadga Prasad Sharma Oli government has also become uncertain as the new government will be in moral pressure to bring new budget.
It will eventually hit an already battered economy hard.

Wednesday, July 20, 2016

Broker commission slashed by almost half

The capital market regulator has nearly halved brokerage commission for trading of share and securities in the stock market. It has reduced the brokerage commission on share and bond transaction by maximum of 40 per cent.
According to the Securities Board of Nepal (Sebon), stockbrokers will now charge a maximum of 0.60 per cent and minimum of 0.40 per cent service fee. Earlier, they used to charge from minimum 0.7 per cent to maximum 1 per cent commission on transaction of shares and bonds.
The brokerage commission for transaction of shares up to Rs 50,000 has been brought down to 0.6 per cent from existing 1 per cent. Likewise, commission for transaction between Rs 50,000 and Rs 500,000 have been reduced to 0.55 percent from current 0.9 percent.
The brokerage will charge 0.60 per cent on sales or purchase of shares of up to Rs 50,000 in value, the board said, adding that the stockbrokers cannot charge service fee of over 0.55 per cent of the transaction value on sales or purchase of shares worth over Rs 50,000 to up to Rs 500,000. "Earlier, the brokerage used to charge 0.9 per cent commission of the transaction value worth over Rs 50,000 to up to Rs 500,000."
The service fee for sales or purchase of shares worth over Rs 500,000 to up to Rs 2 million has been fixed at 0.50 per cent of the transaction value, while service fee for sales or purchase of shares worth over Rs 2 million to up to Rs 10 million has been fixed at 0.45 per cent of the transaction value. The service fee for sales or purchase of shares worth over Rs 10 million has been fixed at 0.40 per cent of the transaction value.
Amending the Securities Businessperson (Stock Broker, Securities Dealer and Market Maker) Regulations 2008, Sebon had presented the proposal to the ministry for approval some 18 months ago. The Finance Ministry has today approved the amendments proposed by the Securities board.
After getting approval from the ministry, the Sebon has directed Nepal Stock Exchange (Nepse) to bring the new fees into immediate effect. However, the new rates will come into effect only after Nepse enforces it.
The decision to bring down brokerage charges has come in the wake of complaints from the investors that such commission was the highest in South Asia. Though decline in commission reduces brokerage's income directly, the lower commission rate will increase transactions and attract new investors which can counterbalance our revenue.
The board has also revised service fees on transaction of securities other than shares issued by companies and sovereign bonds issued by central bank or other government agencies. The service fee has been revised downwards to 0.30 per cent of the transaction amount on sales and purchase of such securities worth up to Rs 500,000. If the transaction amount of such securities stands at over Rs 500,000 to up to Rs 5 million, then service fee cannot exceed 0.25 per cent of the transaction amount, the board added. "If transaction value of such securities stands at over Rs 5 million, then the service fee of 0.20 per cent of the transaction amount should be imposed."
"The rates had not been reviewed for the last eight years," chairman of Sebon Rewat Bahadur Karki said, adding that implementation of automated trading system has nearly doubled turnover in recent days. "We decided to review the rates and bring it down so that the transaction costs become cheaper."
The board also decided to reduce the rate to encourage investors to come to the market and provide more liquidity," he added.
The investors have welcomed the move, saying that it will provide additional financial incentive for trading, and the trading will see increment in the days to come.

Tuesday, July 19, 2016

Will new government bring another budget

Nepal has seen many things – that it had never witnessed in its history – in the past one decade. As if it were not enough, the country could see a new budget altogether for the current fiscal year 2016-17 with the formation of a new government.
With the latest political tug-of war, the future of the budget introduced by the Khadga Prasad Sharma Oli-led government has become uncertain, which is eventually going to hit the economy hard. As the incumbent Prime Minister Oli is buying time in Baluwatar, claiming constitutional confusion, the opposition Nepal Congress and CPN (Maoist Center) – a coalition partner till last week – are showing reluctance to pass the budget.
Nepali Congress leader Bimalendra Nidhi said that the next government may not give continuity to the budget that was presented by the incumbent finance minister Bishnu Prasad Poudel in the parliament on June 28. "Since the remaining budget bills have no relevance as they have not been passed by the end of the last fiscal year, July 16, the new government could bring another budget," he said, claiming that premier Oli is trying to buy time asking the opposition to pass the budget first. "Since the budget has not yet passed, there is enough chance that the new government will bring new budget."
"As the parliament has already passed the Appropriation Bill letting the government spend from the beginning of the current fiscal year, which started on July 16, the remaining bills have no relevance," Nidhi added.
The parliament had endorsed the Appropriation Bill with a majority, authorising the government hand to spend from July 16.
The government has no problem either in mobilising revenue as the Periodic Tax Recovery Act, 1955 has come into effect from June 29. The Act will authorise government to mobilise tax for 6 months till November 30.
Former finance secretary Rameshwor Khanal also said that the government will have no problem in mobilising revenue and spending for six months as the parliament has passed the Periodic Tax Recovery Act, 1955 and the Appropriation Bill.
But he also said that the next government could bring new budget, disowning the one that is in parliament as it has not been passed. "The parliament will ask the next government to either carry on with the current budget or bring the new one," he said, adding that though it has not happened in the history, the next government could disown the budget presented by the incumbent government and bring a new one altogether.
Khanal, however, also said that the opposition should either not have let the government pass the Appropriation Bill or there is no point in obstructing the remaining bills.
Poudel had tabled Appropriation Bill with other bills related to budget including Finance Bill 2016, Bill to Mobilize Internal Loans, and Loan and Guarantee Bill (21st amendment), seeking parliament's approval on July 8. The house passed the Appropriation Bill on the same day but the remaining bills were scheduled to be approved by the parliament on July 13, before the new fiscal year started.
However, with the coalition partner CPN (Maoist centre) withdrawing support to the Oli-led government and registering a no-confidence motion on July 13, the budget approval process has been postponed indefinitely.
Now the political wrangling has made the future of not only the budget but also the economy uncertain as both the government and opposition is making the budget a stepping stone to the power.
The ruling CPN-UML on Sunday has asked the opposition Nepali Congress and CPN (Maoist Centre) to help pass the budget before discussing the no-confidence motion. But Nepali Congress and CPN (Maoist Centre) have been asking Oli to resign and pave way for forming new government before passing the budget.
Finance Minister Poudel on June 28 announced a budget of Rs 1,048.90 billion for the current fiscal year. The budget that was brought before the fiscal year started, according to the new constitution, had raised hopes that it will be implemented and that public spending will be increased. However, the latest development has again made the future of the budget and the economy uncertain.

Monday, July 18, 2016

Nepal's inflation highest in South Asia

Nepal has the highest inflation in South Asia, according to a regional report.
According to the Asian Development Outlook (ADO), published by the Asian Development Bank (ADB) on Monday, Nepal is projected to have the highest inflation rate in South Asia.
The inflation rate has been the highest in Nepal among the South Asian countries for the last couple of years. Nepal's inflation started to stand above all the South Asian countries since fiscal year 2012-13, data shows. In 2011-12, Nepal had the third lowest inflation in the region after Afghanistan and Sri Lanka. However, inflation started going overboard since the last four fiscal years, and continuing the trend for the current fiscal year – that started from July 16 – too.
The ADB has also projected the inflation rate to be at 8.2 percent – that will also be highest in the region – in the current fiscal year 2016-17.
Likewise, the ADB has projected 10.5 per cent inflation for the last fiscal year 2015-16 – that ended 3 days ago on July 15 – the highest among the eight South Asian countries and double the regional average of 5.2 per cent.
Though the central bank and the government had targeted to keep the inflation under 8.5 per cent in the last fiscal year, the inflation has been looking to go above double-digit, according to the central bank's macroeconomic report of the first 11 months of last fiscal year 2015-16. The consumer price inflation – according to the Nepal Rastra Bank (NRB) –increased to 11.1 per cent this mid-June from 7.4 per cent in the same period last year.
Though supply side constraints and blockades have been blamed for high inflation, lack of effective and efficient market monitoring, irregular power supply and shortage of raw materials coupled with the transport syndicate are largely responsible for the ever increasing inflation.
The increasing inflation has been pushing the vulnerable middle class and fixed income group below the poverty line, making Nepal the poorest country in South Asia by 2021, according to senior economist Madan Kumar Dahal.
Currently, Nepal is the third poorest country in the region after Bangladesh and India, according to the World Bank report, which has not included Afghanistan, the newest member of the regional body.
However, the Madhes unrest and Indian blockade have pushed almost 1 million more Nepalis into poverty. They will be joining the nearly 1 million already nudged into poverty by the devastating earthquakes of April and May.
According to the ADB, the devastating earthquakes challenged Nepal's growth and development prospects over short to medium-term. The disaster exacted a huge human toll, taking nearly 9,000 lives and destroying 750,000 homes, factories, and cultural heritage sites.
"It also upended the livelihoods of 5.4 million, pushing an estimated 3 per cent of the population into poverty," it said, adding that the government's post-disaster needs assessment (PDNA) estimated $5.2 billion in capital stock losses and another $1.9 billion in economic losses.
The combined losses are estimated to equal one-third of GDP. The cost of recovery and rebuilding the lost capital stock is estimated at $6.7 billion.
Notwithstanding the significant cost of reconstruction and recovery, the key policy challenge is not the dearth of resources. Nepal's development partners pledged $4.0 billion in reconstruction aid during the International Conference on Nepal's Reconstruction (ICNR) that the government successfully organised in the aftermath of the earthquakes.
Further, in response to the earthquakes, the then Sushil Koirala-led government presented an ambitious budget for 2015-16, which increased total spending to 32.1 per cent of GDP from 24.3 per cent in 2014-15, while capital expenditure was estimated to more than doubled to 10 per cent of GDP, apart from the $910 million allocation for reconstruction -- that is nearly half of the capital budget, according to the ADB.
However, the bureaucratic dilemma and political wrangling halted not only the capital expenditure but also the reconstruction works. By the end of the fiscal year, the government has been able to spend only half of the allocated capital budget. By the end of the fiscal year, the government has been able to spend Rs 117.59 billion capital budget – or 56.30 per cent of the total capital budget of Rs 208.87 billion – according to the Financial Comptroller General's Office (FCGO).

Sunday, July 17, 2016

Nepse begins four-hour trading from today

Nepal Stock Exchange (Nepse) extended trading hours to four hours a day from today, up from regular three-hour trading till last week.
In the early days, almost two decades ago, the share market used to see trading for only two hours a day – from 11 am to 1 pm. Daily trading period was increased to three hours -- from 12 noon to 3 pm later on, which has been extended to four hours from today, according to Rabindra Pradhan, a stock broker.
Nepse decided to extend trading hours following complaints from investors and stock brokers that the three-hour trading time was not sufficient. Trading days, however, have been kept unchanged.
Of late, the stock market has been seeing daily turnover in excess of Rs 1 billion due to lucrative returns that the secondary market offers compared to other investment avenues.
Few months ago, daily transaction hovered over Rs 300 million.
Today – the first day of the four-hour trading period – a total of 2.2 million units of shares of 136 companies worth Rs 1.36 billion were traded in the market. The benchmark Nepse index gained 27.59 points to close the day’s trading at 1,745.74 points from today morning’s opening. The market capitalisation reached Rs 1,920.33 billion at the end of the day.
Meanwhile, the Securities Board of Nepal (Sebon) – the capital market regulator – has asked the Nepse management to initiate reform measures along with extension in trading hours. “The extension of trading hours is appreciable,” Sebon said in a statement issued on Friday. “Nepse should also facilitate to process of bringing clearing bank and start massive reforms for sustainable growth of the share market,” it added.
Sebon, on Friday, also formed a committee to look into big investments in the share market on suspicion of illicit flow of money. The committee led by executive director of Supervision and Research Department of Sebon has directors of Legal Enforcement Division and Securities Businessperson Supervision Division along with representatives from Department of Money Laundering Investigation (DMLI), Central Investigation Bureau (CIB) of Nepal Police and experts in the field as members, according to Sebon Director Niraj Giri.
The committee has been asked to submit its report within a month.
Sebon formed the committee after the Ministry of Finance raised suspicion over the ever increasing transaction amount despite poor macroeconomic fundamentals.
Nepse, however, has claimed that rise in transaction is also due to adoption of dematerialised forms of shares trading, which has made trading easier, apart from lucrative returns. High demand for stocks, low bank interest rates and lack of other attractive investment opportunity in the country coupled with handsome returns compared to other sectors is not only propelling the benchmark index to new highs almost every day but also witnessing transaction of over Rs 1 billion ever day. The bonus and rights shares announced by most of the listed companies – especially banks and financial institutions and insurance companies – to meet the new paid-up capital requirement is yet another key attraction pulling the investors to the market, according to share market analysts.

Nepse begins four-hour trading from today

Nepal Stock Exchange (Nepse) extended trading hours to four hours a day from today, up from regular three-hour trading till last week.
In the early days, almost two decades ago, the share market used to see trading for only two hours a day – from 11 am to 1 pm. Daily trading period was increased to three hours -- from 12 noon to 3 pm later on, which has been extended to four hours from today, according to Rabindra Pradhan, a stock broker.
Nepse decided to extend trading hours following complaints from investors and stock brokers that the three-hour trading time was not sufficient. Trading days, however, have been kept unchanged.
Of late, the stock market has been seeing daily turnover in excess of Rs 1 billion due to lucrative returns that the secondary market offers compared to other investment avenues.
Few months ago, daily transaction hovered over Rs 300 million.
Today – the first day of the four-hour trading period – a total of 2.2 million units of shares of 136 companies worth Rs 1.36 billion were traded in the market. The benchmark Nepse index gained 27.59 points to close the day’s trading at 1,745.74 points from today morning’s opening. The market capitalisation reached Rs 1,920.33 billion at the end of the day.
Meanwhile, the Securities Board of Nepal (Sebon) – the capital market regulator – has asked the Nepse management to initiate reform measures along with extension in trading hours. “The extension of trading hours is appreciable,” Sebon said in a statement issued on Friday. “Nepse should also facilitate to process of bringing clearing bank and start massive reforms for sustainable growth of the share market,” it added.
Sebon, on Friday, also formed a committee to look into big investments in the share market on suspicion of illicit flow of money. The committee led by executive director of Supervision and Research Department of Sebon has directors of Legal Enforcement Division and Securities Businessperson Supervision Division along with representatives from Department of Money Laundering Investigation (DMLI), Central Investigation Bureau (CIB) of Nepal Police and experts in the field as members, according to Sebon Director Niraj Giri.
The committee has been asked to submit its report within a month.
Sebon formed the committee after the Ministry of Finance raised suspicion over the ever increasing transaction amount despite poor macroeconomic fundamentals.
Nepse, however, has claimed that rise in transaction is also due to adoption of dematerialised forms of shares trading, which has made trading easier, apart from lucrative returns. High demand for stocks, low bank interest rates and lack of other attractive investment opportunity in the country coupled with handsome returns compared to other sectors is not only propelling the benchmark index to new highs almost every day but also witnessing transaction of over Rs 1 billion ever day. The bonus and rights shares announced by most of the listed companies – especially banks and financial institutions and insurance companies – to meet the new paid-up capital requirement is yet another key attraction pulling the investors to the market, according to share market analysts.

Friday, July 15, 2016

Financial inclusion in Nepal better: Report

The level of financial inclusion in Nepal is better with 61 per cent adults having access to formal finance, according to a report.
According to the findings from the supply side study and road map for financial inclusion in Nepal, launched in Kathmandu on Friday, only 18 per cent are completely excluded from access to formal finance.
The findings of a joint study of Nepal Rastra Bank, the United Nations Capital Development Fund (UNCDF) and the United Nations Development Program (UNDP) also stated that the actual usage of the financial products is, however, low especially with regard to digital transactions, insurance and credit. "Existing financial products are homogeneous and does not meet the diverse financial needs of the population," it reads, adding that there is a need for access to low-cost, flexible and diverse financial products, better tailored to the unique needs of the population which can enable individuals to manage their financial lives, increase income, manage risk and build wealth over time.
The findings have recommended six broader areas including unlocking constrained credit and savings markets; improving payment systems; bolstering risks mitigation capabilities; enhancing and leveraging locally based financial service providers; enhancing financial inclusion support in state governance, and effective consumer empowerment and education.
The report was jointly launched by vice chair of the National Planning Commission (NPC) Dr Yuba Raj Khatiwada; governor of the Nepal Rastra Bank (NRB) Dr Chiranjibi Nepal and ambassador of the Danish Embassy Kirsten Geelan.
Addressing the launching ceremony, Khatiwada highlighted that the financial inclusion should be meaningful so that it can contribute to improving the living standards of the people and take poor people out of poverty.
Likewise, Governor Nepal, on the occasion, said that the goal of the financial inclusion should be focused toward raising the quality of the life of poor people and reducing the level of poverty.