Budget for FY 2026/27 is ambitious, may boost economy: NCC

KATHMANDU: Nepal Chamber of Commerce (NCC), in a press statement, said it views the federal budget for fiscal year 2026/27 as ambitious. It added that effective implementation could give the economy fresh momentum and that most of its recommendations were reflected in the finance minister’s speech.

The federal government on Friday presented a budget of Rs 2,124.34 billion for the upcoming fiscal year, unveiled by Finance Minister Dr Swarnim Wagle during a joint sitting of the Federal Parliament.

The chamber welcomed several tax measures aimed at simplifying the regime and encouraging investment. It praised the decision to keep the individual income tax exemption limit at Rs 1 million and to cut the maximum income tax rate from 39% to 29%.

It also welcomed the abolition of excise duties on 360 items and the policy of keeping customs rates lower for 273 industrial raw materials than for finished goods. The NCC said capital gains tax on the sale of listed company securities will be treated as the final tax and that a high-level committee will study a multi-rate VAT system.

The NCC supported corporate reforms to simplify company liquidation and to encourage angel investment, venture capital and private equity funds.

Measures aimed at the digital economy drew particular approval. The budget offers a 50% tax exemption on information technology service exports, a 100% tax exemption on sweat equity, and includes plans to establish an artificial intelligence computing centre.

The NCC highlighted other positive provisions, including allowing the private sector to trade electricity internationally, reviewing electricity tariffs for manufacturing industries, introducing business recovery loans, and providing up to a 40% phased subsidy to early capital investor farmers in agriculture and livestock production, up to a minimum of Rs 20 million.

However, the chamber flagged several provisions it said could harm the private sector. It raised concerns about a new 3% tax on services provided by privately operated educational and health institutions. It also criticised a requirement that consumers who use more than 50 units of electricity a month pay a 5% VAT on their electricity bills.

The NCC pointed to increases in capital gains taxes and customs duties that it said would have adverse effects. Long-term capital gains tax rates were raised from 5% and 7.5% to 7.5% and 10%, while the short-term rate rose from 7.5% to 10%. Customs duty on gold and silver was increased from 10% to 20%, with an additional 0.5% luxury and promotion fee. The chamber warned that added taxes and fees on electric vehicles could undermine efforts to promote clean energy and green transport as alternatives to costly imported fuel.

"Overall, if the budget can be implemented, it is expected to make a positive contribution to promoting investment, boosting the morale of the private sector, simplifying the tax system, enhancing the competitiveness of industries and businesses, and expanding overall economic activities," the NCC said.