PSC Notes Value Added Tax


PSC Notes Value Added Tax

PSC Notes Value Added Tax is the complete notes on value-added tax in Nepal.  Revenue is one component of the government budget. Another component is the expenditure. The government has different economic objectives, like a high rate of economic growth, reduction of economic inequality, reduction of poverty, etc. To achieve these objectives, the government should spend money.

For this, it requires revenue. There are two different sources of revenue, i.e. tax and non-tax sources. Taxes are of two types direct and indirect taxes. Direct taxes are levied directly on individuals and organizations. The major types of direct taxes are income tax, corporation tax, wealth tax, interest tax, etc. On the other hand, indirect taxes are levied on goods and services. The major types of indirect taxes are value-added tax, excise duty, customs duty, and so on.

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In the least developed countries (LDCs) like Nepal, the share of direct taxes on the total tax revenue of the government is very limited. The major reason behind this is the low level of income and wealth of people. So, such countries are heavily dependent upon indirect taxes to collect the necessary revenue to f nance the expenditure. Among different types of indirect taxes, the contribution of value-added tax (VAT) is highest in the Nepalese economy.

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VAT is the latest form of indirect tax. , However, the government has not implemented the VAT at that time but it decided to reduce the rate of turnover tax. Similarly, Professor Thomas S. Adams recommended VAT for the USA in 1921. In 1953, Michigan State of the USA introduced a limited feature of VAT. However, the tax was not introduced by any country until 1953. In real practice, France launched VAT in 1954 (Subedi, 1998).

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