Provinces refuse to pullback taxes

- Post Report, Kathmandu

Jul 31, 2018-

Provincial governments refuse to pullback taxes that the federal government says are ‘unconstitutional.’ They insist on levying taxes saying, the federal government has ‘no authority to teach them lessons on taxation’. Except Gandaki province, six other six provinces are currently at loggerheads with the federal government on this issue.

The provinces introduced ‘District Export Tax,’ and other taxes and fees not mentioned in the constitution and the Act made for Inter-Government Fiscal Arrangement.

The federal government said it was against the constitution and urged the provinces not to levy such taxes and fees.

Province 1 has imposed ‘District Export Tax’ on 207 agricultural and forest items.  The tax rate varies for different products.

Karnali Province has imposed export tax on stones, sand, gravel, clay and mines from one district to another. Besides imposing such tax, the Province 3 has also imposed ‘collection tax’ as well.

Besides the District Export Tax, the federal government is alarmed by the 0.5 percent ‘Natural Resources Tax’, imposed by Province 2 on the sale of cements and clinker. Province 5 charges Indian vehicles entry fees between Rs 160 to Rs 320 per vehicle.

The provinces have refused to withdraw the recently imposed taxes. Their decisions clearly violate Article 236 of the constitution.

Province 1 Minister for Economic Affairs and Planning Indra Angbo said the provincial cabinet has decided not to withdraw the ‘District Export Tax’ that they consider as ‘Sales Tax’ instead of export tax.

Article 236 of the constitution, says no tax should levied on transporting goods from one province to another or districts.

“This is just ‘Sales Tax’ we charge when the producer sells goods to buyer from another district,” he said.

This issue does not concern the federal government. Issues of national importance and those involving inter-province co-ordination come under the purview of the central government, he stressed.

Province 3 plans to continue ‘District Export Tax’ using another name so that it avoids violating the constitution. Province 3 Ministry of Economic Affairs and Planning Spokesperson Kishore Bartaula said, “A proposal of continuing the tax in another name has been forwarded to the Cabinet.”

Regarding the District Export Tax imposed by Province 6, its Minister for Economic Affairs and Planning Prakash Jwala said he has not yet received the letter from the federal government. “We believe whatever tax we are levying is constitutional and legal,” he told the Post.

Finance Ministry’s Inter-Governmental Fiscal Management Division Chief Hari Bashyal said they sent letters to provincial governments not to charge taxes/fees.

“Some taxes imposed by provinces are against the constitution and some can be implemented through a minor revision. For example, Province 7 can categorise Province Development Fee as industry registration fee,” said Bashyal.

Another major issue is ‘Province Development Fee’ for registering and renewing industries. Province 7 Ministry of Economic Affairs and Planning Secretary Shankar Krishna Shrestha said they are considering charging Province Development Fee only for registration of new industry and exempting industries that expanded in the province without charging any fee.

“We concluded that charging fee on the expansion of already established industry might be breach of constitution but we can charge fee on registration new industries,” said Shrestha.

Finance Ministry officials said the issue must be resolved through discussion. The federal government has not initiated any formal dialogue on the issue of provincial taxes.


List of Provincial taxes

  • Province 1 has imposed District Export Tax’ on 207 agricultural and forest items
  • Karnali Province has imposed export tax on stones, sand, gravel, clay and mines from one district to another.
  • Besides District Export Tax, the Province 3 has also imposed ‘collection tax’ as well.
  • Province 2 has introduced over 0.5 percent ‘Natural Resources Tax’
  • Province 5 has started charging entry fee on Indian vehicles
  • Province 7 has ‘Province Development Fee’ imposed on the registration and renewal of the industries

Published: 31-07-2018 07:27

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