November 1: Nepal has slipped down five places to 110th position in the global ranking for ‘Doing Business’ due to the new restrictive Labour Act, according to a report published by the World Bank.
The World Bank report suggested Nepal to make paying taxes easier by simplifying the process of social security related payments.
“This is the reason that the recent labor act has made the process more cumbersome and contributed to pushing the country down five places to 110th in the global ranking for the ease of doing business,” says the World Bank Group’s Doing Business 2019: Training for Reform report, released on October 31.
According to the annual ranking, Nepal made paying taxes more difficult through the 2017 Labour Act that introduced a labour gratuity, medical insurance and accident insurance paid by employers in a way that places a larger administrative burden on companies that already face considerable bureaucracy. The labour gratuity is a particular burden as employers must file and pay it manually every month whereas the medical and accident insurance is paid annually.
This has had an impact on the number of tax payments and time in hours to comply with tax obligations, said the World Bank. As a result, it took companies in Nepal around 39 payments and 353 hours to comply with their fiscal obligations in 2017. This compares unfavorably with the global average of 24 payments and 237 hours.
Nepal ranks 158th for paying taxes in the Doing Business ranking out of 190 countries and this is its lowest ranking among the 10 indicators. Aside from paying taxes, Nepal also ranks low in other indicators for the ease of doing business, including enforcing contracts (154), dealing with construction permits (148), and getting electricity (137).
Nepal’s performance contrasts with the rest of South Asia where a total of 19 business reforms were carried out in the region during the past year, the second highest ever, compared with previous year’s revised record of 21 reforms.