Kathmandu: The government is preparing a sweeping overhaul of Nepal’s long-criticized and overly complicated tax structure by abolishing several overlapping taxes imposed on fuel and vehicles.
Finance Minister Swarnim Wagle is set to unveil the budget for the fiscal year 2026/27 on Friday during a joint session of the federal parliament. Alongside the budget speech, he will also table three key bills, including a financial bill that proposes eliminating several scattered taxes that have long burdened both taxpayers and administrators.
According to a list of ordinances to be issued by the Cabinet immediately after the budget is endorsed, the changes are expected to take effect from midnight Friday.
At present, fuel and vehicles in Nepal are subject to multiple layers of taxation, including infrastructure development tax, road construction levy, road maintenance and improvement fee, pollution control charge, and green tax. The Finance Ministry is preparing to abolish four of these taxes and consolidate them under a single framework.
Economists have long argued that collecting several different taxes on the same product creates unnecessary complexity and inefficiency in the economy. Consumers currently pay separate charges under different headings when purchasing a litre of petrol, including infrastructure tax, road maintenance fees, and pollution charges. Vehicle owners also face additional road construction levies during import and registration.
Beyond fuel and transport, the government has introduced numerous narrowly defined taxes over the years, such as health risk taxes, agricultural reform charges, and luxury taxes. Officials say the fragmented structure has increased administrative costs, consumed significant manpower, and created unnecessary hassles for citizens.
The reform is being presented as an effort to simplify the system by removing outdated and redundant charges.
Currently, Nepal imposes an infrastructure development tax of Rs 10 per litre on petrol and diesel imports. Petrol is also subject to a road maintenance fee of Rs 4 per litre, while diesel carries a Rs 2 fee. A pollution control charge of Rs 1.50 per litre is collected on both fuels. Vehicles imported or registered in Nepal are additionally charged a road construction levy ranging from 5 to 10 percent of their value.
The government also levies green taxes on products considered environmentally harmful. Coal imports are taxed at 50 paisa per kilogram, while petrol, diesel, and furnace oil are charged Rs 1 per litre under the green tax category. Lubricating oil, transformer oil, and white oil are also taxed at the same rate.
Finance Ministry officials say the separate taxes will now be merged into a single “green tax” system, which will serve as the umbrella framework for collecting these revenues going forward.
According to ministry sources, the government’s policy direction had already hinted at the move. During the presentation of the government’s annual policy and program on May 11, President Ramchandra Paudel stated that pollution-related, infrastructure-related, and other scattered fees would gradually be transformed into an integrated green tax system.
Officials say Minister Wagle’s strategy is to consolidate the abolished infrastructure tax, road levies, maintenance fees, and pollution charges into one broader and more powerful green tax category.
As a result, the scope of the green tax is expected to expand significantly — covering everything from coal and petroleum products to small private vehicles and large transport carriers under a unified taxation system.
Nepal #Budget #Economy #Finance
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