The Unexpected Aftermath of Book Tax

From the fiscal year 2019/20, the Government of Nepal has imposed a 10% custom duty on import of books. While many Nepalese readers and experts have already termed it as an unacceptable tax on knowledge, there is no doubt that this protectionist policy also comes with many long term consequences that directly affect the local consumers, industry, as well as government. 

A nation opts for protectionism in order to cushion the domestic industries that may face a threat from the already successful foreign industries. Protectionist policy has its own advantages. It keeps the domestic economy in full motion and attracts more domestic entrepreneurs while keeping away possible threats of international dumping. But free trade still stands as an important pillar to strengthen an economy and improve its welfare in the long run. 

Coming back to book tax imposition, the first victims of this policy are going to be the consumers as their choices will become limited and isolated from the international preferences of the consumers. Not to mention the obvious price hikes that can be expected once these local industries do not have to be up against international competition. 

The second victims would be the local businesses as they would soon lack entrepreneurial dynamism and motivation for innovation, a result which might limit their expansion in the future and prove that their chances of competition in the international market are next to impossible. 

The final victims would be the government themselves, as their possible gains from comparative advantage will be eliminated. The economic isolation will hamper the growth and specialization of the country, making it even weaker than it was without the policy. 

These are all the consequences of the long run, that is, besides the fact that such a tax imposition on books is likely to compel the readers to switch to pirated materials and discourage them from future purchases. 

If the government really wants to strengthen the domestic press industry, it should analyse the reason behind its insufficiency. The domestic press needs relief from a range of taxes that they have to face, starting right from the raw materials. If the government can reduce or eliminate some of these tax burdens, it may result in an increase in revenue, which was their prime motive. 

A proper policy should be able to consider long term effects for all the people. Protectionist policies may save some industries or jobs while destroying others. Therefore, this policy is short-sighted and needs to be reviewed as soon as possible. 

Anushruti Adhikari

Anushruti is a Research Intern at Samriddhi Foundation. She is a Graduate Student of Bachelors in Business Administration- Specialization in Banking and Insurance. She is interested in Economics, Policy Research and Analysis

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