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Reviews | Increase taxes on electric vehicles

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The promotion of electric vehicles in Nepal through lower taxes is a classic case where the poor are at a disadvantage in financing the greening of the rich.

There is no doubt that Nepal needs to do more to increase adoption of electric vehicles. Nepal is still a long way from achieving its goal of ensuring that electric vehicles account for at least 20 percent of the total vehicle fleet, which is currently less than 1 percent.

This year’s budget, announced in May 2021, eliminated excise duties and reduced tariffs from 40% to 10% on the import of electric vehicles. He canceled provisions in the previous year’s budget that had increased excise duties and tariffs on electric vehicles. Taxes have been an easy political goal for the promotion of electric vehicles. After all, customs and excise duties are the main factor driving the cost of such vehicles in Nepal.

Although I fully endorse Nepal’s goal of increasing the use of electric vehicles, I have long struggled to explain why I wanted taxes on electric vehicles to be increased. It is not a popular opinion.

Then I failed my driver’s license exam.

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Some 25 years after driving with a clean criminal record and driving license in two countries, I failed the driving test in Nepal when I returned home this year and applied for one. It wasn’t that I was flippant about it. I have purchased and studied all of the sample papers for the written exam. I went for three days of driving practice around the course where the test was to take place.

The pass rate for the driving license exam in Nepal is woefully low, around 25 percent. In comparison, in India it is closer to 70 percent, even though India has half the number of personal vehicles per capita in Nepal.

The Ministry of Transportation Management, which manages driving licenses, maintains that strict driving exams are needed to keep our roads safe. This is an absurd claim, largely discredited by the evidence, and which masks a different reality: vehicle ownership is simply not a goal for Nepal.

The government just does not want to encourage people to own personal motor vehicles. Reasonably, the country cannot really afford it and the road infrastructure is not quite there to support the increase in vehicle ownership. In addition to the low pass rate for driving license exams, high vehicle fees are also an indicator of the intention to discourage vehicle ownership.

The goal of discouraging personal vehicle ownership is a sad reflection of our poverty and state of development. But this is our reality, and it should encourage the promotion of public transport, and now shared journeys, as we move towards a prosperous future where we can all own cars, bikes and more. types of motor vehicles.

It is in this reality that we must ensure that the promotion of electric vehicles does not open the floodgates to vehicle ownership. Even with the higher taxes in last year’s budget, electric vehicles were still cheaper in Nepal than conventional vehicles.

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Even with high taxes, compound taxes for electric vehicles were 120-140%. Conventional vehicles, on the other hand, are subject to compound taxes of around 250-300%. These tax differences more than offset the higher base price of electric vehicles compared to their comparable equivalent conventional vehicles.

There is a cost to reducing vehicle import duties when these taxes represent about 40 percent of all government revenue. This loss of income directly affects the delivery of services to the poor. Last year, for example, the government is estimated to have raised around Rs 100 billion through duties on vehicle imports. The total education budget that year was Rs 161 billion.

Even taking two-wheelers into account, vehicle ownership in Nepal is mostly reserved for the wealthy. The poor must depend entirely on public transport, which is weak, unreliable and lacks any real investment to improve its quality.

Imports of Kia Niro, an electric vehicle, stopped last year after its price rose to Rs 12.5 million. This year, with the revised budget, the price has come down to Rs 7 million. How many disadvantaged children could you go to school with Rs 5.5 million per year?

Drivers of Kia Niro and other electric vehicles believe they are cutting Nepal’s fuel imports, increasing demand for electricity and switching to clean transportation. But for millions of poor Nepalese deprived of quality education, health and other social services because their government cannot afford it, it will be time to start building towards another revolution for the world. ‘equality.

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