LEAP-Reforming Liberating Trading Sector

The paper looks into the major government regulations involving enterprise registration, taxation, and standards governing domestic trading microenterprises of Nepal and highlights the difficulties relating to compliances of such regulatory requirements. The paper attempts to offer recommendation on revising certain aspects of the regulations to ease the process of doing business in Nepal for aspiring micro and small entrepreneurs. The cumbersome regulatory regime that overwhelms the limited comprehension ability of the micro entrepreneurs has grossly compelled them to stay in the informal sector. As a consequence, such informally operating trading microenterprises are forced to adopt regressive business practices that are not favourable to the growth (even sustenance in many cases) of the business. Meanwhile, the unfavourable environment for microenterprises in Nepal that barres their growth is even likely to the hinder the wider economic progress of Nepal as the past empirical studies conclude sizable contribution of MSEs on the national GDP and employment status as a worldwide phenomenon. Trading entrepreneurs face regulatory hurdles right from the inception of their business as they are presented with the redundant requirement to record their identity at various level of governments ranging from central to local. The frequency of the burden continues as the entrepreneurs are expected to deal with the perplexing taxation system on a quarterly basis leading them to fall prey to the nuances of the regulators and bureaucracy. The intensity of falling victim to the convoluted regulation system does not stop here as trading entrepreneurs are also often found accused and charged for not following the compliance standards that are either unreasonable in nature or are enforced to the wrong segment of the value-chain. Importantly, such regulatory difficulties not only hinder the progress of the trading enterprises but also demotivate potential entrepreneurs to step up into the formal economy. The paper identifies several proven resolutions as setting up a one door regulatory provisions and simplifying the tax filing mechanism for trading microenterprises that is believed to have yielded fantastic results around different parts of the world. It follows with recommendations for regulatory amendments as adoption of online registration system fortified with digital signature infrastructure, facilitation of enterprise registration and taxation services from a local government avenue, and enforcement of only suitable compliance requirements that it believes shall significantly reduce the regulatory hurdles for trading enterprises while boosting the rate of formalization amongst them.

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