1. 1 Focus of the Study This is the age of management information system (MIS) in the business world, which enables management to provide the appropriate information at optimal cost so manager can manage in private as well as government organizations. MIS can be defined as the system, which provides proper information that helps management to take management decisions in a timely fashion. Therefore the information served by management information system is very crucial for a proper management of a business organization.
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In a process of receiving information from various sectors, MIS use various sectors. As well as we can find the position of income tax in government revenue. Income tax is the main source of government revenue. If high sources of income tax in government revenue, government can make good development, economic planning for development of the nation. After knowing about the contribution of Income tax in government revenue of Nepal, we can find the strength and weakness of the government functions and method of raising the revenue.
There are various sources of government revenue. Income tax, VAT, custom duty, foreign aid, internal and external loan are the main sources. There are various users and interested person and sector of Income tax in government revenue. Government is the main interested and handles body of income tax. Government can make suitable policies, acts and rules for increasing the government revenue. In current situation, government must have sufficient revenue for developing the nation. At present government expenditures is gradually increasing but government revenue is not satisfactory.
The trend of income tax in government revenue is not satisfactory up going, even it’s going down some years. Thinking of taxpayer towards the tax is not positive. The study of income tax shows the performance and contribution of taxpayers. Nepal has adopted mix economy. So there is equal contribution of private and public sector for economic development as well as government revenue. The overall performance of government and taxpayers reflected on contribution of collection of income tax in government revenue.
Government and financial policymakers can make suitable policies and rules for collection of high income tax from organizations. Analysis of income tax in government revenue is the mean of financial and accounting interpretation. We can say that analysis of income tax in government revenue is meaningless until and unless it is properly analyzed, interpreted and taken any corrective actions to the best way. Therefore the analysis and interpretation part of government revenue is fulfilled by the analysis of income tax.
The idea of introducing income tax in Nepal originated along with the first ‘Budget’ on 21st Magh 2008 B. S. (1952 AD). The first elected government finally introduced ‘Business profit and Remuneration Tax Act 2017’ to promise income tax on remuneration and business profit in Nepal. The ‘Business profit and Remuneration Tax Act 2017’ had very narrow coverage that income tax was imposed only on business profit and remuneration. Since this act could not cover all the sources of income, the ‘Nepal Income Tax Act 2019’ replaced it after two years to avoid such drawbacks.
After a year, ‘Nepal Income Tax Rules 2020’ were enacted with the view of implementing the objectives of the income tax act. According to the changing condition this act was also incapable in fulfilling the needs of changing time, it was replaced by another, ‘Income tax Act 2031’. In the course of development and modernization of income tax system, the new ‘Income Tax Act 2058’ has been enacted. Similarly, the new ‘Income Tax Rules 2059’ have been enacted for the effective implementation of the objectives of the Act.
The study will cover the analysis and interpretation of all activities related to income tax such as income tax from Business income, Investment income and Employment income. Main purpose of the study is to find out the relationship between income tax and other sources of government revenue, the trends of collection of income tax, contributing part of income tax in government revenue and to point out the reasons of low collection and imposed of income tax. 1. 2-Statement of the problem Income tax is the main source of government revenue. For the development of nation, every government needs high revenue.
For higher the revenue, the main sources is income tax. The economy of a country flourishes with the flourish of government revenue and collection of income tax and it deteriorates with unsatisfactory performance of Government function in the country. Therefore periodical review and analysis of Income Tax in the country is very essential. Performance of Income Tax is very constructive for all stakeholders closely attached with the government revenue as well as for a prosperous economic future of the country. Generating income by any individual or institution is the main sources of income tax.
If income is favourable then collection of income tax is also favourable. Lower contribution of income tax in government revenue negatively affects the country’s development. The variation of income tax contribution brings the variation of government revenue and government development function. Country’s economic development and government revenue are the closely related parts. For higher revenue, economic development is necessary and for better economic development of a country, high government revenue is necessary. Nepal is a landlocked country. The trend of collection of income tax is not satisfactory.
As maintained above, sustainable economic development and good political environment is necessary for growth the income. Income is source of income tax. Currently, political situation of Nepal is not good. From one decade it’s being worse. Here is no good environment for income generating functions. Previously running organizations also can’t perform better. They are going downwards. Individual income is also not a good increasing trend. It affects directly income tax and government revenue as well as government activities. The data of income tax may suffer a lot in lack of proper view and analysis practice of it.
Currently contribution of income tax in government revenue of Nepal may not sufficient for development of nation. At the analysis period of data income tax collection remained below the expected level due to various national and international level. Therefore, this research study is concentrated on trend of income tax collection to review and analysis the contribution in government revenue and to draw recommendation for coming period.
1. 3-Objective of the study
1. 3. 1 General Objective
- To analyze the contribution of Income tax in the government revenue of Nepal.
1. 3. 2 Specific objective
- To measure the ability of income tax to meet the government current requirement.
- To measure the ability of income tax to meet the government long term planning and policies.
- To measure the operating efficiency and ability to ensure for adequate government revenue.
- To analyze the problems of revenue collection from Income Tax.
- To suggest some measures for the improvement of Income Tax collection.
1. 4 Signification of the study
There are many institutions and individual that many contribute for government revenue by income tax. But their ability and willingness is not so good.
The proportion of income tax in government revenue is not appropriate. The trend of income tax collection also is not sustainable and satisfactory. Much income tax acts and rules were implemented and many of are active at present. But they are not properly implemented. For many of these problem there is best alternative to analysis the trend and contribution of income tax in government revenue.
1. 5 Research Questions
For the effective performance and result of the study and to state the findings in a core and precise form, the important research questions have been structured:
- What is the state of income tax collection?
- What is the proportion of income tax income for government revenue?
- What is the trend of income tax collection?
- What are the findings for coming days?
1. 6 A brief survey of the related literature
- The related theoretical and previous studies review will be made later on while writing the thesis. Main of these is:
- Budget speech of many fiscal years
- Performance Review of public and private Enterprises
- Economic survey of many fiscal years
- Statement of Income and Expenditure of many fiscal years
- Statement of Revenue of many fiscal years Different Acts, Rules and regulations, Ordinance and Circulars related to Income Tax
- Related Research, Thesis, Articles, Journals, Books, Web site etc.
1. 7 Limitations of the Study
The study on “Contribution of income tax in the government Revenue of Nepal” is not free from the following limitations:
- This study is based on financial statements, Economic surveys, Statement of revenue and Income and expenditure, which are subject to limitation of many National and International causes.
- This study is based on past data’s which are provided by IRD or published.
- The various methods and formulae are been taken as standard formula, which are worked out on the basis of different items and conditions.
- Mostly secondary data are analyzed.
- The area of income tax is very wide, so all the part of it may not be covered.
- Being a student, different types of resource constraint is another important factor, which has limited the scope of the study.
2. 1 Research Design
A research design refers to the conceptual structure within which the research is conducted. The research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance the research purpose within the economy and easy to procedure. This study is basically both in analytical and descriptive.
2. 2 Data collection procedure
For the study, secondary data will be collected from IRD, Budget speech, Economic survey, Statement of Income, Income and Expenditure and from other related sources. The secondary data related to income tax and revenue are basically from last fifteen years.
2. 3 Tools for analysis
To conduct the study, management and statistical tools such as ratio analysis, trend analysis, correlation regression analysis, variation, weights, diagram, graphs etc. will be used as required by the study.
2. 4 Methods for analysis and presentation
Various results will be calculated by using various management and statistical tools, and formula, which are required for this study. Then the data will be presented on suitable tables, diagrams, graphs and formats with the help of different suitable computer software on the basis of which necessary interpretation and explanation will be drawn.
2. 5 Plan of work
The study will be carried out on sequential order, which will be five chapters. The first chapter will begin with the introduction of the study, followed by review of literature, research methodology, presentation and analysis of data and conclusion and recommendation in second, third, fourth and last fifth chapters respectively.
2. 6 Bibliography
- Amatya, S. K. , Pokharel, B. B. and Dahal, R. K. (2004), Taxation in Nepal, M. K. Publisher and Distributors, Kathmandu, Nepal.
- Budget speech of the Fiscal Year 2055/056 to 2060/061.
- Economic Survey of the Fiscal Year 2055/056 to 2060/061.
- Income Tax act, 2031(1974) and Income Tax act, 2058 (2002)
- Income Tax Rules, 2059.
- Income Tax, Circular Collection 2055/56 to 2060/61.
- Statement of Income and Expenditure of the Fiscal Year 2055/056 to 2060/061.
- Statement of Revenue from 2055/56 to 2060/61.
- Wolf, H. K. , and Pant, P. R. ,(2002), SOCIAL SCIENCE RESEARCH AND THESIS WRITING, Buddha Academic Publishers & Distributor Pvt. Ltd. , Kathmandu, Nepal.
- Web sites : http://www. ird. gov. np/index1. php http://www. taxresources. com/ http://www. asosai. org/journal1993/revenue_auditing_in_nepal. htm
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