High tax burden on people, state coffers remain in deficit
Summary
Despite a broad tax system, Nepal faces slow revenue growth and widening fiscal deficits, burdening citizens with high taxes yet poor public services. Experts call for tax system reform and better revenue mobilisation.
Key Points
- Nepal imposes one of South Asia's highest tax burdens with nearly four dozen taxes collected by various government levels.
- Despite high taxes, revenue growth has slowed, leading to widening fiscal deficits and poor public service delivery.
- The ratio of federal revenue to GDP has declined from 21.5% in 2020-21 to 19.3% in 2024-25, with revenue collection often missing targets.
- Experts recommend tax system simplification, digitalisation, and reforms to improve efficiency rather than immediate tax cuts, amid rising government liabilities.
