• China says US accusations of forced tech transfer are severe distortion of reality
• China says will take action to defend its interests
• China says no matter how US attitude changes, China to continue on its own path

BEIJING: China’s commerce ministry on Thursday accused the United States of being “capricious” over bilateral trade issues, and warned that the interests of US workers and farmers ultimately will be hurt by Washington’s penchant for brandishing “big sticks”.

Previous trade negotiations with the United States had been constructive, but because the US government is being unpredictable and challenging, Beijing has had to respond in a strong manner, commerce ministry spokesman Gao Feng said in a regular briefing in Beijing.

President Donald Trump threatened on Monday to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliates against his previous announcement to target $50 billion in imports. The United States has alleged that China is stealing US intellectual property, a charge denied by Beijing.

Washington’s accusations of forced tech transfers are a distortion of reality, and China is fully prepared to respond with “quantitative” and “qualitative” tools if the US releases a new list of tariffs, Gao said.

“It is deeply regrettable that the US has been capricious, escalated the tensions, and provoked a trade war,” he said. “The US is accustomed to holding ‘big sticks’ for negotiations, but this approach does not apply to China.”

Financial markets are worried of an open trade conflict between the world’s two biggest economies after three rounds of high-level talks since early May failed to reach a compromise on US complaints over Chinese practices and a $375 billion trade deficit with China.

A Sino-US trade war could disrupt global supply chains for the tech and auto industries, sectors heavily reliant on outsourced components, and derail world growth.

“It will not be easy for the US to identify $200 billion worth of Chinese imports that it can levy tariffs on without hurting US companies and/or consumers, given the strong involvement of US companies in a large share of China’s exports to the US,” British forecaster Oxford Economics said in a recent note.

‘CANNOT BE SOFT’

China said it will impose additional tariffs on 659 US goods, with duties on 545 of them to kick in on July 6, after Trump said Washington will impose tariffs on $50 billion of Chinese products.

The US goods affected on July 6 include soybeans, fruit, meat products such as pork, autos, as well as marine products.

Beijing has yet to announce an activation date for its tariffs on the remaining 114 US products, which include crude oil, coal and a range of refined fuel products.

“We cannot be soft with Trump. He is using his ‘irrationality’ as a tactic and he is trying to confuse us,” said Chen Fengying, an economics expert at state-backed China Institutes of Contemporary International Relations.

“But if we could accomplish some of the things that he wants us to do – such as IP, market reforms, he’d be helping us. Of course there are risks, those would depend on how we handle those reforms.”

China could hit back at US firms listed on the Dow Jones Industrial Average if Trump keeps exacerbating tensions with China over trade, state-controlled Chinese tabloid The Global Times said on Thursday.

The Dow, which counts Boeing Co, Apple Inc and Nike Inc among its constituents, ended down 0.17 percent on Wednesday. The 30-stock share index has declined 0.25 percent year-to-date.

“US unilateral protection measures will ultimately harm the interests of US companies, workers, and farmers,” Gao told reporters.

He said the two sides are due to negotiate on issues around the manufacturing and service industries “in the near future”.

White House trade adviser Peter Navarro, who views China as a hostile economic and military power, said on Tuesday that Beijing had more to lose from a trade war.

“Jobs for the Chinese are just as precious as those for the Americans,” Zha Daojiong, professor of international political economy at the School of International Studies at Peking University, told Reuters in an email.

“It will be wise for the two sides to come back to the negotiation table, abide by a temporary agreement and turn down the rhetoric.”

China imported $129.89 billion of US goods last year, while the United States purchased $505.47 billion of Chinese products, according to US data.

Kathmandu, June 20

Prime Minister KP Sharma Oli has sought Chinese investments in Nepal to fill the financial and technological gap in the country.

Addressing Nepal-China Business Forum jointly organised by Embassy of Nepal in China and China Council for the Promotion of International Trade, PM Oli said huge foreign investment, including from China, is crucial to fulfil Nepal’s aspiration of graduating from the least developed country status and becoming a middle-income country by 2030.

“Nepal today requires massive investment in infrastructure development and introduction of advanced and innovative technology. As investing in Nepal today is a profitable business and the government is committed to maintaining an investment friendly environment, Nepal expects huge investment from China,” said Prime Minister Oli.

Oli informed access to market will not be a problem for Nepal due to the strategic location between two vibrant economies of the world. “Nepal is committed to further improving the business climate in the country and doing everything that will enhance the investors’ confidence,” he said.

Citing that Nepal has enacted friendly laws and policies on foreign investment, public private partnership, industrial enterprises, banking and intellectual property, the prime minister informed that every sector in the country including manufacturing, hydropower, IT, services, tourism, mining and agro-based industries are open for foreign investment.

On the occasion, Prime Minister Oli also expressed his commitment to maintaining liberal economic policy with the private sector as a key partner.

Moreover, he also stated that Nepal today offers a favourable fiscal environment with low tax slabs, no income tax on earnings of industry exporting its products established in Special Economic Zones for a certain period of time, exemption of tax and tax holidays for certain industries, and exemption of duty and fees on the key inputs used by an export industry.

“Moreover, our law also permits full repatriation of income earned from investment and reinvestment,” added Oli. Availability of cheaper labour force and improved labour law and industrial relations, as per Oli are the other crucial factors that make Nepal a good investment destination.

Kathmandu, June 20

Internet service providers (ISPs) are likely to increase the subscription charge on the internet services they provide in the next fiscal. In the budget of fiscal 2018-19, Finance Minister Yubaraj Khatiwada has brought a provision that has levied income tax of 13 per cent on telecommunication services charge (TSC), which the ISPs also have to pay.

Previously, this income tax was not applicable on the TSC for ISPs. As a result of this increase, the service charges for telecommunication services like voice call, internet, SMS and others could rise.

“Due to the provision that has increased the income tax rate on internet services, the internet subscription charge will likely rise in the next fiscal,” said Sudheer Parajuli, former president of Internet Service Providers’ Association of Nepal (ISPAN).

“We are planning to add the TSC on the internet services we provide and it will be effective in the next fiscal. The TSC increase will surely make the internet, phone calls, SMS, and other telecom services more expensive,” he added.

However, the Ministry of Information and Communications (MoIC) has said that they are studying the price of internet bandwidth in the international market. “We have started a technical study on whether it is necessary to raise the price of internet services by the ISPs and also on whether telecom companies need to raise their rates,” said Mahendra Man Gurung, secretary of MoIC.

“The government will do its best to create an environment whereby the price of telephone and internet services is not raised,” he added.

While presenting the first federal budget of 2018-19, Minister Khatiwada had announced of increasing the income tax rate on internet and telecommunication services. The new corporate income tax has been increased to 30 per cent from 25 per cent. Some experts have said that the increase in TSC could hamper access of telecommunication services for poor people.

“The government says it will expand internet services to each and every sector of the nation but the new provision in the budget will increase the cost of internet services, which the poor people may not be able to afford,” Parajuli stated.

In addition, the government has also announced in the budget of increasing the service charge on telecommunication service to 13 per cent. Previously, the government used to charge 11 per cent. The telecom service charge is only applicable to telecommunication operators like Nepal Telecom, Ncell, Smart Cell, United Telecom Ltd and Hello Nepal.

Nepal Telecommunications Authority (NTA) — the regulatory body of country’s telecommunication sector — has also started a study to see if the price hike by the ISPs would be justifiable.

“The ISPs cannot include the TSC in their subscription charge before taking permission from us, therefore we are conducting a study on that matter,” informed Min Prasad Aryal, spokesperson for NTA.

Kathmandu, June 20

Taxpayers registered in the value added tax (VAT) net in the large tax payers’ office (LTO) are now connected to the central server of the Inland Revenue Division (IRD). The invoice generated by 15 taxpayers have started being automatically uploaded simultaneously to the central server of the tax administration.

According to Yagya Dhungel, spokesperson for IRD, the Division will connect hotels, automobile dealers and department stores in this system, which was launched in November last year. Major auto dealers, star hotels and big department stores registered at the LTO have already entered this system.

As per Dhungel, this system was recently launched in Pokhara too and will be expanded throughout the country. Tax offices under the IRD have been urged to execute the system for the big taxpayers gradually in the aforementioned sectors. After covering these sectors the remaining sectors will be covered, he said.

The IRD has introduced this system to minimise the compliance gap in VAT. Billing enforcement was considered the major challenge in VAT system, which was introduced two decades back. VAT has been contributing the highest amount among all revenue sources.

Lack of billing, fake VAT bill and evasion of VAT have posed a threat to the VAT system.  The tax administration is simultaneously intensifying market monitoring to control such ill practices.

A total of 196,000 taxpayers are registered in VAT. Out of them 30 per cent of them are non-filer and 50 per cent are credit filer and zero filer, according to Dhungel. Only 15 to 18 per cent submits VAT to the government.

Kathmandu, June 20

The federal budget 2018-19 has failed to introduce major reforms in the taxation system of the country as the compliance gap is high due to lack of transparency, lack of capacity in the tax administration and high cost of tax collection,according to experts.

Speaking in a programme titled ‘Budget 2018-19 and Tax Justice’ organised by the South Asian Dialogue on Ecological Democracy and Alliance for Tax and Financial Justice, economists and experts said that the federal budget has done nothing to promote a fair tax system in the country. The government has raised the rates of indirect taxes, which will ultimately affect social well-being and raise inflation, according to Binaya Kumar Kushiyait, professor, Central Department of Economics, Tribhuvan University (TU).

“The share of direct tax in total tax collection is just 30 per cent and that is why expansion of tax rate cannot be justified,” he stated.

The finance minister has tried to take credit by introducing a progressive tax system for individual income tax, however, he has overlooked expansion of tax net. The price of daily essentials is expected to increase due to increase in tax rate and withdrawal of value added tax (VAT) rebate facility, as per experts.

Uddhav Pyakurel, assistant professor of Political Sociology at Kathmandu University, said that the government has tried to take the middle-income people into confidence by introducing the new tax slab of 10, 20 and 30 per cent. Those who earn above Rs 400,000 annually have to pay 10 per cent for the next Rs 100,000 above the threshold of exempted amount and 20 per cent for the next Rs 200,000. “Though the government is oriented towards taxing those who earn more higher, which is also known as ‘progressive taxation’, the share of individual income tax in the total tax is negligible,” he said.

Citing that a wide range of businesses are out of the VAT net, the finance minister had to focus on increasing the compliance gap and expanding the net instead of increasing tax rates, he added.

However, another professor of Economics at TU, Umashankar Prasad, said that the federal budget has introduced a progressive and realistic tax system as it has levied health hazard tax on sales of cigarettes and liquor. Similarly, it has tried to create an opportunity for domestic industries to grow as excise on the intermediate goods has been increased.

However, he added that the country’s dependence on capital, technology, employment and products explains how fragile the Nepali economy is. “The unsustainably growing trade deficit, weak foreign currency reserves, lack of employment opportunities in the country and weak production base were mentioned in the ‘whitepaper’ of the government but the federal budget could not address the structural challenges of the economy.”

Economists at the programme have said that the success of the country’s first federal budget will depend on its execution. The country is poor in the execution of the budget, especially the capital expenses, which is necessary to bring about changes in the livelihoods of the taxpayers, according to Keshab Raj Khadka, professor of Economics at Tribhuvan University.

The government has set a target to raise revenue collection (consolidated) by 35 per cent to Rs 945.13 billion in the next fiscal from Rs 730 billion in the current fiscal.