Finance Ministry launches Domestic Revenue Mobilization Strategy

KATHMANDU, SEPTEMBER 11 : The government has introduced the Domestic Revenue Mobilization Strategy (DRMS) for five years from the fiscal year 2024/25 to 2028/29. 

"In the aftermath of the COVID-19 pandemic and global supply chain disruption due to geopolitical tensions, Nepal’s economy, like many others, has been facing various economic problems like reduced industrial output, escalated unemployment, low level of revenue collection, etc. Consequently, maintaining fiscal stability of the country  is emerging as a grave challenge  for the government," states the Finance Ministry adding," In this context, this strategy, aligned with the 16th Five-Year Periodic Plan  is focused on addressing the very challenge prudently."

The primary objectives of the DRMS include increasing revenue mobilization from domestic sources to strengthen fiscal stability, improving taxpayer compliance with tax laws and systems, enhancing risk management capabilities in tax and customs administrations,  advancing automation in tax and customs processes, and improving inter-governmental and inter-organizational coordination for tax policy design and implementation are its other key focus areas. 

Formulated through a participative process, the DRMS looks to balance the imperative of revenue generation for socio-economic development with the expectation of private sector stakeholders and taxpayers, according to the source of the Ministry of Finance. 

The strategy is gravitated toward aligning the tax revenue-to-GDP ratio with the revenue targets set by the Sixteenth Five-Year Plan. In the fiscal year 2022/23, the ratio was 18.9%, with an ambitious goal of increasing it to 23.5% by the end of the fiscal year 2028/29. During this period, the tax revenue-to-GDP ratio is projected to rise from 16.2% to 20.9%. The implementation of the action plan and revenue reform measures included in the strategy is expected to further increase the tax revenue-to-GDP ratio by 2.4%.

Additionally, improvements in tax and customs administration are expected to generate an extra 0.1% in tax revenue. The budget deficit-to-GDP ratio, which was 7.2% in fiscal year 2022/23, is projected to decrease to 6.5% by the final year of the strategy’s implementation.