Kathmandu: The Nepali government has come under scrutiny for implementing significant changes to tax rates without following the mandatory legal procedure of publishing a “Notified Order” in the Nepal Gazette.
Historically, various administrations have kept these orders confidential while enforcing new tax regimes immediately following the budget speech. Despite the formation of a government with a near two-thirds majority and the appointment of renowned economist Dr Swarnim Wagle as Finance Minister, observers note that the ministry is adhering to the same opaque practices that have long characterized the country’s financial administration.
While the Finance Bill presented by the Minister in the House of Representatives states that certain clauses are effective immediately, the mere tabling of a bill does not grant it the force of law for tax collection. To bridge the gap between the budget speech and the formal passage of the Finance Act, the government relies on the Provisional Tax Collection Act of 1955. This 71-year-old legislation empowers the Cabinet to issue a “Notified Order” to collect or increase customs duties, excise, or other taxes in the public interest for a period of up to six months. However, the law explicitly defines such an order as one that must be published in the Nepal Gazette to be valid—a step the current administration has neglected to take since the budget was unveiled on May 15.
Tax experts have expressed disappointment over this procedural lapse, highlighting that expectations were high for a more disciplined and legally sound approach under a specialist Finance Minister. They argue that without the formal publication of the Notified Order, the government lacks the legal standing to alter tax rates based solely on an unpassed Finance Bill. This disregard for formal notification suggests that the “expert” leadership is repeating the very administrative irregularities it was expected to reform, leaving the immediate enforcement of new taxes in a legal grey area.
The mechanism allowing for such immediate tax hikes is contained within a brief, three-page law that ensures the state can collect revenue even while Parliament deliberates on the budget for several weeks. This prevents market manipulation and ensures fiscal continuity. This legal tool is so potent that it allows revenue collection to continue even during “budget holidays” when the government is legally barred from spending money, or during periods of political instability. Nevertheless, the integrity of this system relies on the public notification of the Cabinet’s decision, a requirement that the Ministry of Finance has so far ignored, continuing a legacy of fiscal secrecy.
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