Nepal | October 19, 2019

Panel submits report to FinMin

Himalayan News Service

Three major aspects on dispute of tax enforcement by the local and provincial governments highlighted.

Kathmandu, September 20

A study panel formed by the Cabinet following the dispute and widespread criticism regarding tax enforcement at the lower layers of administration in a haphazard manner has submitted its report to Finance Minister Yubaraj Khatiwada today.

A three-member panel, led by Secretary at the Ministry of Federal Affairs and General Administration Dinesh Kumar Thapaliya and comprising Revenue Secretary at the Ministry of Finance Shishir Kumar Dhungana and Secretary at the National Natural Resources and Fiscal Commission (NNRFC) Baikuntha Aryal, has highlighted three major aspects on dispute of tax enforcement by the local and provincial governments.

According to Thapaliya, convener of the panel, the lower layers of administration lack proper knowledge regarding the taxes that should be levied by them. The lower layers of administration have enforced some taxes like natural resource utilisation tax on businesses and production units at the local level. “One local body was found taxing brick kilns citing utilisation of natural resources like soil and water, which is against the constitution,” he said.

Likewise, some provinces were found to be levying export tax and vehicle tax on vehicles from foreign countries, which the panel has highlighted are not under their jurisdiction.

Thapaliya further said that the local governments lack orientation regarding how taxes need to be levied. “Before imposing any tax, the proposal must be endorsed by local assemblies, however, some local units have imposed taxes without taking the necessary consent.”

On the other hand, though the country has entered into the federal set-up, the District Coordination Committee, which is a district-level mechanism, is still collecting taxes for forest and agro products. The panel has recommended the federal government to prevent district-level mechanisms from collecting revenue.

Similarly, provinces and local units were also found to be levying pollution tax, one-time vehicle entry fees and recommendation fees, among others. But, they have not collected property taxes, rental taxes and registration fees properly.

Secretary Thapaliya further stated that though the local units have the potential to enforce the rental tax properly, which is expected to hover around Rs 60 billion in a year, collection of such tax is weak. Some of the local units have not collected rental taxes, which is a potential sector.

The panel report has said that the local bodies need to properly execute the taxes under their authority instead of exploring tax headings beyond their jurisdiction.

The panel report has recommended the local bodies to collect nominal fees for registration of life situations like births, marriages and deaths stating that the local bodies have raised registration fees excessively.

The panel report also recommended the federal government to develop a guiding document to provide guidance for tax collection to the lower layers of administration.

A version of this article appears in print on September 21, 2018 of The Himalayan Times.

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