Plan to introduce inheritance tax draws mixed reaction

Kathmandu, Sep 1: The government’s plan to introduce inheritance tax has received a cautious welcome from analysts and political observers. They have called on the authorities concerned to carefully weigh the pro and cons before reaching a decision.

A day after Finance Minister Yuba Raj Khatiwada revealed about the ongoing discussions to introduce inheritance tax, leaders and observers on Saturday welcomed the plan but said that any decision to expand the tax net should be duly justified.

Former Finance Secretary Shanta Raj Subedi said that the government’s plan to introduce inheritance tax was a step toward the right direction. However, he emphasized on the need of determining tax rate through extensive consultations.

“Imposing inheritance tax would encourage people to make good use of their property, increase investment and discourage the ongoing practice of accumulating wealth for offspring. It would even discourage corruption and irregularities,” said Subedi.

On Friday, Minister Khatiwada had revealed about the government’s plan to bring inheritance under the tax net, but had avoided details citing lack of enough discussions on the matter.

Inheritance tax is levied on property inherited from person who has died. Such tax rates are determined on the basis of various factors including the condition of the residence/property, total worth of the inheritance, and the beneficiary’s relationship to the deceased. Several countries across the world including Britain and Japan have such tax. The tax is either imposed as duty on the estate of a deceased or as an inheritance tax on the inheritor.

Since Khatiwada’s disclosure, several high profile leaders from across the political spectrum have backed the plan, while some others have demanded the rationale behind the additional tax burden.

Surya Raj Acharya, spokesperson for Sajha Bibeksheel Nepal Party, took to Twitter to welcome the idea of inheritance tax describing it as ‘a progressive and effective tax through economical lens’. But he said that the government should warrant social security and assure public their tax won’t be misused before introducing it.

Several others including two former finance ministers— Ram Sharan Mahat and Devendra Raj Panday— responded to reports of inheritance tax, asking the government to ensure good utilization of revenue before introducing such tax.

“We must already be one of the highest Tax to GDP ratio countries, certainly we are so in South Asia. The government should not go on collecting more revenue from taxpayers unless it is able to channel them to investment, not consumption and wasteful public expenditures,” Panday tweeted.

Inheritance tax has become a dominant issue since former Finance Minister Surendra Pandey had proposed introducing it as an effort to encourage utility of parental property. But neither Pandey nor his successors dared to introduce it fearing backlashes from public already terrorized by high tax rate and rampant tax imposed by the three tiers of governments.

Many fear that such tax could face stiff resistance as many are unhappy with the misuse of government funds by officials in purchasing luxury vehicles, and in foreign junkets and paying perks to people’s representatives.

Subedi said that the danger of backlash was real but said that the government should push on with the plan by introducing a minimal tax rate in the beginning.

“We are bound to go to inheritance tax sooner or later. The government could start with a minimal tax rate to avoid resistance,” said Subedi.