4.8.2.

1 Structure of Direct Tax

Table No: 4.7

Trend and Composition of direct Tax Revenue

(Rs. In Million)

Total Tax Direct TAX

Fiscal GDP Revenue Revenue
Years Amount Amount Amount As%
Amount of As % of As% of
GDP TR TTR

1990/91 120370 10730 8176.4 1369.55 1.14 12.76 16.75

1991/92 149487 13513 9875.6 1594.91 1.07 11.80 16.15
1992/93 171474 15148 11663 2035.19 1.19 13.44 17.45
1993/94 199272 19581 15371 2854.39 1.43 14.58 18.57
1994/95 218175 24575 19660 3847.46 1.76 15.66 19.57
1995/96 248913 27893 21668 4584.95 1.84 16.44 21.16
1996/97 280513 30374 24424 5231.62 1.87 17.22 21.42
1997/98 300845 32938 25940 6012.89 2.00 18.26 23.18
1998/99 342036 37251 28753 7294.64 2.13 19.58 25.37
1999/2000 379488 42894 33152 8553.22 2.25 19.94 25.8
2000/01 411275 48894 38865 10159.3 2.47 20.78 26.14
2001/02 422807 50446 39331 10595.8 2.51 21.00 26.94
2002/03 456675 56230 42587 10101.6 2.21 17.96 23.72
2003/04 495589 62331 48173 11908.4 2.40 19.11 24.72
2004/05 548484 70123 54105 12260.2 2.24 17.48 22.66
2005/06 611118 72282 57430 14972 2.45 20.71 26.07
2006/07 675484 87712 71127 16722 2.48 19.06 23.51
2007/08 755262 107623 85156 20147.9 2.67 18.72 23.66
2008/09 910160 143475 117052 29099.1 3.20 20.28 24.86
2009/10 1193000 179940 156290 39573 3.32 21.99 25.32
2010/11 1367000 216644 188730 48579 3.55 22.42 25.74
2012/13 1695000 295729 259572 70188 4.14 23.73 27.04
2013/14 1965000 354500 314639 87658 4.46 24.73 27.86
2014/15 2120000 411848 355955 99383 4.69 24.13 27.92
2015/16 2249000 460425 412424 116798 5.19 25.37 28.32

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 Direct tax is actually paid by the person on whom it is imposed legally. The impact
or money burden and the incidence are on the one and same person. The magnitude
of direct tax on the economy depends upon the economic development and
economic growth, it means as the economic growth increases, per capita income of
the countrys people automatically raises and the magnitude of direct tax goes up.

The contribution of direct in total tax revenue is lesser than the contribution of
indirect tax in Nepal, because of slower economic development. The table 4.7
shows the composition of direct tax to the total GDP, to the total revenue, to the
total tax revenue and its percent-based contribution on those above mentioned
economic parameters.
Above table shows that, the contribution of direct tax to GDP has been increasing in
each fiscal year. At the beginning the study the contribution was about 1.14 percent,
but towards the end of the study it increased to about 5.19 percent. This increasing
trend of direct tax is not somehow satisfactory as it increases very slowly. Similarly
direct tax contributes approximately one-fifth to total revenue and one-fourth to the
total tax revenue.

4.8.2.2 Structure of Indirect Tax

Indirect tax is imposed on one person but it is paid either partly or wholly by
another person. In the case of indirect taxes, the impact and incidence of tax are on
different persons. Before the implementation of VAT, sales tax, contract tax, hotel
tax, entertainment tax wee indirect taxes, but the VAT came into existence having
merged all these four types of taxes in case of Nepal. The contribution of indirect
tax has always been very high and significant. The following table shows the
contribution of indirect tax to total GDP, to the total revenue, to total tax revenue
and its percent based contribution to those above mentioned economic parameters.
 Table 4.8
Trend and composition of Indirect Tax Revenue
(Rs. In Million)

Total Tax Indirect TAX

Fiscal GDP Revenue Revenue
Years As% As As%
Amount Amount Amount Amount of of
% of
GDP TR TTR
1990/91 120370 10730 8176.4 6806.85 5.65 63.44 83.25
1991/92 149487 13513 9875.6 8280.69 5.54 61.28 83.85
1992/93 171474 15148 11663 9627.81 5.61 63.56 82.55
1993/94 199272 19581 15371 12516.6 6.28 63.92 81.43
1994/95 218175 24575 19660 15812.5 7.25 64.34 80.43
1995/96 248913 27893 21668 17083.1 6.86 61.24 78.84
1996/97 280513 30374 24424 19192.4 6.84 63.19 78.58
1997/98 300845 32938 25940 19927.1 6.62 60.50 76.82
1998/99 342036 37251 28753 21458.4 6.27 57.60 74.63
1999/2000 379488 42894 33152 24598.8 6.48 57.35 74.2
2000/01 411275 48894 38865 28705.7 6.98 58.71 73.86
2001/02 422807 50446 39331 28735.2 6.80 56.96 73.06
2002/03 456675 56230 42587 32485.4 7.11 57.77 76.28
2003/04 495589 62331 48173 36264.6 7.32 58.18 75.28
2004/05 548484 70123 54105 41844.8 7.63 59.67 77.34
2005/06 611118 72282 57430 42458 6.95 58.74 73.93
2006/07 675484 87712 71127 54405 8.05 62.03 76.49
2007/08 755262 107623 85156 65008.1 8.61 60.40 76.34
2008/09 910160 143475 117052 87952.9 9.66 61.30 75.14
2009/10 1193000 179940 156290 116717 9.78 64.86 74.68
2010/11 1367000 216644 188730 140151 10.25 64.69 74.26
2011/12 1527000 244374 211722 155997 10.22 63.84 73.68
2012/13 1695000 295729 259572 189384 11.17 64.04 72.96
2013/14 1965000 354500 314639 226981 11.55 64.03 72.14
2014/15 2120000 411848 355955 256572 12.10 62.30 72.08
2015/16 2249000 460425 412424 295626 13.14 64.21 71.68

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The table 4.8 shows that the economy is heavily depends upon the indirect tax,
which contributes about 5.54 to 13.14 percent of total countrys GDP and three-
fourth of total tax revenue.

4.8.3 Tax/GDP Ratio

The relationship between total revenue and GDP is known as revenue effort
ratio. Similarly, the relationship between tax and GDP is known as a tax effort
ration. The tax/GDP ratio is the indicator which shows the utilization of taxable
capacity, which depends upon the ability of people to pay or the ability of the
government to collect. In Nepal the tax/GDP ratio is very low and it is
marginally increasing. The tax/GDP ratio is shown in the table 4.9.

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