Weekly Economic Bulletin: 22nd January 2023 to 28th January 2023
The Supreme Court ruling spells the end of forced service charges?
On January 25th, Wednesday, the?Supreme Court’s ruling ?delivered a decisive blow to the issue of 10% service charge by declaring it illegal for all service providers, from airlines to hotels &?restaurants to add the extra burden on the customer bills. This brought an end to the long-standing debate on the legitimacy of these charges and?set the precedent that tipping is now a choice left to the discretion of the consumer.
The Supreme Court of Nepal has declared Section 87(3) of the Labour Act and Rule 82 of the Labour Regulations null and void with effect from 25th of January,2023 on the ground of inconsistency with the constitution as such compulsory services charges imposes unreasonable restrictions on the enjoyment of the fundamental right conferred by the constitution.
Service providers have been collecting service charges as per Section 87(3) of the?Labour Act? which states that “If service charge is collected from consumers by a hotel, motel, restaurant, jungle safari or any similar business, it shall be distributed to laborers pursuant to collective bargaining”. Accordingly, service fees was?distributed between hotel employees (72%), the hotel management (23%), Hotel Association Nepal (2%) and the three trade unions (3% divided equally) affiliated to the Nepali Congress, CPN-UML and CPN (Maoist Centre).?
With the ruling, the hotels, restaurants & other service providers can now only add 13% VAT on consumer bills which too shall be included in the menu price itself.?
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Youth Exodus? 65,000 leaving Nepal in one month
In the month of Poush, a staggering 65,000 youths have obtained labor approval from the Department of Labour to embark on a journey abroad in pursuit of employment opportunities. Malaysia, Qatar, and Saudi Arabia are the popular destinations amongst the young workers seeking labor opportunities. Overall, the number of workers who receive labor approvals remains more or less comparable at the 5,00,000- 6,00,000 range per year in Nepal.?
Temporary permit granted for operation of illegal crushers amidst construction project delays.
The government announced a temporary permit for crusher plants deemed "illegal" to continue operations, with?the stipulation that they must register and pay taxes by mid July.?Previously, the Home Ministry issued an order to close down all unauthorized crusher facilities, leading to the closure of 890 out of approximately 1200 crushers across Nepal.?
As a result, there was shortage of materials like sand and gravel from river beds causing many construction projects to be halted. In response, a cabinet meeting decided to allow the crusher plants to operate, provided they register and pay taxes. As the government has currently only spent around 15% of their planned capital expenditure, it is predicted that construction projects led by both the government and private sectors are expected to peak during the remaining period of this fiscal year.