NAFTA welcomes budget but criticises 100‑200 pc liquor duty hike

KATHMANDU: Nepal Foreign Trade Association (NAFTA) has welcomed the budget for upcoming fiscal year 2025/26, which the government unveiled on May 29.

NAFTA praised the budget for addressing private sector concerns and for declaring the sector as the driving force of the economy.

NAFTA’s long‑standing demands, such as reviewing a multi‑rate VAT and making customs valuation more realistic by replacing the current reference price list with an automated system based on international price trends, have been met. The budget also abolishes the advance income tax on imports of food grains, beans, fruits, vegetables and livestock, removes the bank guarantee required for obtaining an EXIM code, and ends the minimum tax on non‑taxable transactions.

NAFTA welcomed measures allowing Nepali businesses to invest abroad, reducing land rent for special economic zones, offering SEZ‑like facilities to industries exporting over 30% of production, introducing an electric vehicle policy and facilitating foreign tourists who declare over $5,000 at customs. It also noted 75% tax exemption on income from IT service exports, and provisions enabling taxpayers to settle outstanding liabilities from revised tax assessments. However, NAFTA criticised the budget for increasing liquor import duties by 100% to 200%, warning that this could encourage smuggling. The budget does not increase the income tax exemption limit or reduce personal income tax rates, which are needed to boost public purchasing power. NAFTA further stated that prohibiting route, entry or other fees for the temporary entry of transport vehicles, and selecting authorised businesspersons for fast‑track inspections, will aid trade facilitation.

Overall, NAFTA considers the budget balanced and inspiring, but stressed that its successful implementation is essential for achieving the set goals and benefiting the target groups.