Not so taxing: Online tax system, a decade later

Lal Bahadur Khatri, Under Secretary of the Inland Revenue Office, describes the experiences and successes in implementing an online tax system after almost a decade of its initiation

March 10, 2018

When the online VAT module was introduced in the country, and the large taxpayers’ office effectively enforced the online tax system, it represented a turning point of sorts in the effort to digitize government processes in Nepal. Following the execution of the policy in 2008/2009, nearly 15 percent of taxpayers submitted their tax details online, which was a great start and provided a much-needed boost to our confidence in terms of scaling up the scheme. Today, we can proudly say that majority of work with regards to tax payment is done online. 

Before we had made the shift, taxpayers had to visit the Inland Revenue Department at regular intervals to submit tax information. That made for big crowds and long waits at the offices, not only compounding the obvious frustrations of service seekers, but also leading to unnecessary expending of resources on the part of the department itself in collecting details from taxpayers. Four to five people in each office had to devote the entirety of their time to registering and recording the information, and errors and delays were all too frequent owing to the time pressure on these employees and the sheer volume of data they were dealing with.

What’s more, since the details had to be filed in the form of hard copies, it was necessary to recruit even more people for this purpose alone, creating further opportunities for human mistakes in compiling the right documents in each file. It was, to put it mildly, a very cost-ineffective way of working. This was why the decision was made to take the system online.

Initially, there was some concern from among staff members who found the transition to the new system difficult and confusing, since they were so used to the manual modality, but they eventually adapted. As for taxpayers and customers, the department undertook a campaign to educate them about the upgrade: visitors to the offices were given the necessary information, and demonstrations held in the capital to illustrate the basics and advantages of the online tax system.

Since then, we have come a long way. At present, 100 percent of VAT returns are conducted online, and apart from a few cases, most taxpayers are submitting their details through the new system.

The initiative is receiving some attention, too: a draft report of a recent study shows that Nepal is actually ahead of developed nations like Singapore and Japan where the online tax system is concerned. The country is also listed among the revenue bodies with substantial volume of electronically-filed VAT returns and personal income tax details in the year 2015, and for the use of e-filing in documenting corporate income tax information.

These are dazzling heights that we’ve achieved, but there is always room for improvement—the servers, for instance, need to be fortified further so that transfer of files is even swifter. We are also working on broadening the range of e-payment so that taxpayers can do everything sitting at home. Once we fully roll out the e-payment system, there will be a paradigm shift in the way people and business houses think about tax payment.

E-governance is a reality and necessity in these modern times, and government agencies in Nepal can no longer shy away from taking part in such innovative schemes—we must grab at the future with both hands.

About the Author

Lal Bahadur Khatri is the Under Secretary of the Inland Revenue Office, Government of Nepal. He will be one of the presenters at the Conference on Technology for Public Services being organized on 21 March 2018 by UNDP Nepal in partnership with the National Innovatin Centre, Nepal Entrepreneurs Hub, Robotics Association of Nepal, Karkhana, Nepal Communitere, NAST/GoN,  FNCCI/Innovation Hub, Ministry of Science and Technology