Taxing debate

Dila Pun of Bheri municipality in Jajarkot dis­trict of western Nepal is not amused. She used to pay Rs 16 in land and property tax annually. But as a part of the municipality’s consolidated property tax she is now having to fork out Rs 1,900 for the same piece of real estate. “There has been no change in public services. The local hospital does not have medicines for even common fever and yet the government is burdening us with back-break­ing taxes,” she complained with APEX.

 

Pun’s grievance with local taxes reverberates right across the country. In Tilottama municipality of Rupandehi district, also in western Nepal, the local level units of Nepali Congress have formed ward-level ‘struggle committees’ against the ‘arbi­trary imposition’ of new taxes. With everything from mom-and-pop shops to cattle being taxed under the new regime, people’s frustration with elected officials, and with the new federal setup—which has rightly or wrongly come to be associated with higher taxes—is growing.

 

In the absence of proper guidelines, such taxes at lower levels of government can often be arbitrary and punitive. There is also a risk of duplication in taxes among the three tiers of government. The National Natural Resources and Fiscal Commission, a constitu­tional body, was supposed to sort out these issues. Yet nearly three years after the promulgation of the new constitution, this ‘facilitator’ between the three tiers of government is yet to get its full shape.

 

This in turn is indicative of lack of political com­mitment to implement the seven-province, 753-local body federal formula. Even though the constitution has clearly delineated Nepal as a federal republic, there is still reluctance to devolve power and resourc­es away from Kathmandu. This is reflected in the fact that over 70 percent of all taxes collected in the coun­try is going into the coffers of the federal government. On the other hand, neither the local units nor the federal government have been able to offer a credi­ble rationale—for instance guaranteed social security (See here)—for increased local taxes. This is not so much a sign of the failure of federalism as it is of the mindset of our top politicians who are yet to internalize that the old unitary setup has been aban­doned—for a reason. The latest tussle over taxation is likely to a harbinger of much bigger disputes between different government tiers.