Kathmandu, March 26

Amid increasing complaints from the private sector that local governments have been imposing new taxes haphazardly, the government has outlined the tax collection jurisdiction of the local governments.

Though the Constitution has mandated local governments to collect different taxes, it was necessary for the federal government to clarify constitutional provisions regarding tax collection at the local levels and elucidate their financial and revenue rights, according to officials at the Ministry of Federal Affairs and General Administration (MoFAGA).

Hence, MoFAGA has recently published a guideline and circulated it among all 753 local governments highlighting their revenue and tax collection rights.

“As the guideline has clearly stated the types of taxes or revenue that local governments can impose or collect, it will facilitate financial procedures at the local levels and reduce chances of double taxation on any business or individual,” said Dinesh Kumar Thapaliya, secretary at MoFAGA, adding that the new guideline has already come into force.

As per the guideline, local governments can collect taxes like property tax, land and house tax, business tax, vehicle parking tax, tax on consumption of herbs, and service tax in tourism sector.

Similarly, MoFAGA has also clarified that local governments will be liable to collect taxes on roads and consumption of water, electricity and public libraries or any other public properties. Likewise, the local governments can also collect taxes for various services like public toilets, parks, ponds, bus parks, drainages, bridge, among others.

However, the local governments cannot collect taxes on any goods being supplied by central government, provincial governments and any other government-owned agencies for projects being developed under foreign aid or domestic sources itself. Local governments also cannot collect taxes under any other heading that are envisioned tax-free by the government policies.

Meanwhile, private sector has said that though the government has assured that businesses in the country will not have to bear double taxation under the new federal system, private investors and traders are anxious due to the inability of the government to bring new policies addressing the taxation system in the new system of governance.

“Sporadically, we have found some local governments trying to impose taxes under different headings though businesses have already been paying taxes under such headings,” said Rajesh Kazi Shrestha, president of Nepal Chamber of Commerce.