Annual Budget has nothing much for financial sector.

The annual budget seems to have ignored the financial market as it contained barely any concrete programmes aimed for the sector.

Stakeholders had been waiting for the fiscal administration to bring some much-wanted tax reliefs since the last two fiscal years. Banks and insurance companies were expecting merger incentives while the capital market was hopeful regarding tax waiver on small investments in mutual funds.

However, the document says that the government will create a Financial Sector Development Strategy.

The banking sector that had been expecting tax incentives for financial institutions opting for mergers has once again been disappointed. The budget failed to provide any tax discount or rebate on corporate gain tax paid by the merging entity. However, financial institutions and insurance companies that register for a merger within fiscal year 2013-14 will be eligible for getting already offered facilities.

“The budget has not offered much to the banking sector. We have been asking for tax exemption for institutions that are merging but it was not announced,” said president of Nepal Bankers’ Association Rajan Singh Bhandari.

Financial institutions have to pay 30 per cent corporate gain tax. At present, merging financial institutions and insurance companies are waived registration fee for the merged institutions.

The central bank governor had also expressed hope that the fiscal policy might bring projects that make mergers more encouraging for financial institutions.However, the budget has announced a few programmes aiming at increasing financial access across the nation. It said that pension and social security payments will be made through bank branches through branchless banking services.

“The move will definitely bring more of the population in the banking net —especially in rural areas with quite a sizeable population that receives these transfer payments but do not own a bank account,” said Bhandari.

He also added that since the budget has come on time, the financial sector will probably not face any liquidity crunch due to the cash flow.

Likewise, the budget will also invest in Rural Self Reliance Fund and Rural Finance Regional Cluster Programme to increase access to formal banking in rural areas through microfinance. Moreover, the government will subsidise the interest for agro and animal husbandry loans to promote these sectors.

Likewise, to promote agro insurance — including crop, poultry and fishery insurance — the government will give 50 per cent subsidy on premiums paid by farmers for the insurance policies.

The capital market also seems to have been ignored by the budget as there was no change in the tax structure unlike the request of Securities Board of Nepal (Sebon). It had suggested the revenue administration to implement pay per transaction tax system instead of the current regime of capital gain tax to simplify the tax calculation for investors.

“Changes in the tax regime have not been addressed and there has not been any tax rebate or discount provided to mutual fund investors,” pointed out Sebon’s executive board member Rewat Bahadur Karki.

To promote mutual funds in Nepal, Sebon had been lobbying for some tax discounts to unit holders on mutual fund’s gain and dividends to engage more public in the capital market since the last two years.

“May be the current financial administration aiming at increased revenue base does not want to reduce or cut any revenue generation,” he said.

Like earlier, the budget reiterated its direction to Sebon to prepare a base to regulate the commodities market.
src THT