Of late there has been no shortage of voices linking higher taxes with the supposed failure of the federal formula. It is true that taxes have been increased (and their scopes widened) across the board, from properties to small businesses. Even cattle and bicycles are now being taxed. Land and property taxes were minimal under the old unitary dispensation, with most people paying no more than Rs 100. But under the new consolidated taxes, the same taxes have jumped to an average of well above Rs 1,000.Kathmandu municipality has introduced a spate of new levies and jacked up old ones. It will charge Rs 500 for a person to prove, on paper, that he is alive. To be liable for a naturalized citizenship, the recommendation forum will set you back by Rs 10,000. In Dhangari sub-municipality of Kailali district, you will have to pay an annual tax of Rs 15 if you own a bicycle; crossing a local river on a boat there will incur you Rs 25 a trip. In Godavari municipality of the same district a chatpate seller will have to fork out Rs 20 and an ice-cream seller Rs 30 a day.

 

Perhaps one reason for such widespread skepticism of the new tax regimen is that people are just not used to hearing of ironsmiths and fruit sellers paying taxes. In time, they might sound pretty normal. But in the view of political analyst Shyam Shrestha there is another, more important reason for this skepticism. “Neither the central government nor the local level governments have bothered to explain the ratio­nale for these levies,” he says.

 

He has a point. These taxes will help pay for social security and basic health and education needs of the locals, a duty of the local bodies under the new constitution. “How can the local bodies guarantee these services without raising taxes?” Shrestha asks. But Shrestha says elected representatives have thus far been unable to credibly assure the people that their money will be well spent.

 

“If you can assure them that all their basic needs will be taken care of, who will oppose higher taxes?” he asks.

 

Notably, three years after the promulgation of the new constitution, the all-important National Natural Resources and Fiscal Commission it envisioned to work out taxes and division of spoils among different tiers of the government is yet to get a complete shape (See: HERE). Perhaps the political masters of the country were never sold on federalism.