National

Provinces, local levels seek larger slices of revenue pie

- PRITHVI MAN SHRESTHA, Kathmandu
Under the revenue sharing mechanism of the Inter-Governmental Fiscal Arrangement Act, 70 percent of the taxes—value added tax and excise duty—goes to the federal government, while the provinces and local level get 15 percent each.Similarly, the federal government will get 50 percent of the royalty received fromnatural resources, while the provincial and local governments receive 25 percent each

Dec 7, 2018-Finance ministers of the provinces and chiefs of the local governments have sought a larger share of revenue than what has been allocated to them under the Inter-Governmental Fiscal Arrangement Act.

During a meeting of the Inter-Governmental Fiscal Commission chaired by Federal Finance Minister on Thursday, they expressed displeasure at the existing share of revenue for the sub-national governments.

As per the revenue sharing mechanism of the Act, 70 percent of the taxes—value

added tax and excise duty—goes to the federal government, while the provinces

and local level get 15 percent each.

Likewise, the federal government will get 50 percent of the royalty received from natural resources, while the provincial and local governments receive 25 percent each.

Bijaya Kumar Yadav, Province 2 finance minister, told the Post that the provincial and local governments sought a larger share as the current provision does not reflect the spirit of federalism. “Officials of the federal government assured that they would consider our request,” Yadav said.

Finance ministers of the provinces also asked for arrangement of the government employees at the sub-national levels and clarify the misunderstanding on different taxes at three layers of the governments.

Stating that varying interpretations of the tax related laws from the centre, province and local levels created complications in collecting the taxes, they have asked the federal government for clarity and remove contradiction in different laws.

Karnali Province Finance Minister Prakash Jwala said they had asked the federal government to clarify on taxation amid dispute over a number of taxes and fees.

The provincial and local governments have been accused of charging taxes, such has District Export

Tax, Patake Sawari Kar (Vehicle Tax based on frequent movement of vehicles),

pollution control fees, scrap tax going against their jurisdictions.

However, Minister Yadav said the centre must take lead in settling the issue. “I don’t think we have gone beyond the constitutional mandate while imposing the pollution tax,” he said.

Beside tax issues, provincial ministers have also complained about handing over of the multi-year contracts to the provincial governments without budget and institutions.  Citing the lack of adequate budget, some provincial governments have refused to accept the number road projects.

The Federal Finance Ministry has also admitted that there was the issue of ownership on the number of multi-year projects, according to a presentation made by the ministry during the meeting.

“We also complained about the current Public Procurement Act which has a provision of awarding a contract to the lowest bidder,” said Jwala. Base on the discussions on Thursday, the federal government will prepare a synchronised report and submit in the next meeting of the committee, according to Yadav.

Published: 07-12-2018 08:00

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