Table of Contents
Literal Meaning
Tax or Taxation (देवनागरी: कर Means in one sense a royal revenue, toll, tax, tribute, duty in saskritam, one of the oldest languages in the world)
History
The first record of organized taxation comes from Egypt around 3000 B.C. Taxes have been collected in Nepal, India and the Indian Sub-Continent and other parts of the world from thousands of years as a way of funding the kingdom or state or empire to maintain welfare state in the nation, maintain defense, recruit armies, and prepare forts, etc.
Direct Tax
If tax is levied directly on the income or wealth of a person and the burden of the payment of tax cannot be shifted to other person, then it is called direct Tax. The payment of direct tax ‘pinches’ the taxpayer. For example: Income Tax, Vehicle Registration Tax, Integrated Property Tax collected by Local Governments. You may remember that there are 753 different Local Levels or Governments in Nepal, so if you have real estates across multiple local levels, then you will be paying such property taxes to all those individual local governments. These type of taxes and duties are collected only from those people who have earned taxable incomes (in case of Income Tax), those who own vehicles in their names (in case of Vehicle Registration Tax), or those who own land, building or both, or apartments in their names (in case of Integrated Property Tax).
Indirect Tax
If any tax is levied on the price of a commodity or service, then it is called an indirect tax where the burden of payment of the tax is shifted from manufacturer to various level of sellers to the ultimate consumer. For example: Customs Duty, Excise Duty, Value Added Tax, Health Risk Tax, Luxury Tax, etc.
Power to collect Taxes in Nepal
Article 115(1) of the Constitution of Nepal, 2072 provides that, No taxes and duties shall be levied and collected except than as per the law. Now, lets take a small glance over some taxes and duties collected in Nepal and their governing laws are:
- Income Tax is levied through the Income Tax Act, 2058.
- Value Added Tax is levied through the Value Added Tax Act, 2052.
- Excise Duty is levied through the Excise Duty Act, 2058.
- Customs Duty is levied through the Customs Act, 2064.
- These taxes and duties are levied and collected through yearly Finance Act passed from the Federal Parliament:
- Digital Service Tax [2.5%]
- Green Tax (Introduced from 2081)
- Foreign Tourism Duty (Introduced from 2080) [5%]
- Luxury Duty (Introduced from 2080) [2%]
- Foreign Employment Service Charge [1%]
- Infrastructure Development Tax [रू 10 per liter of Petrol and Diesel imported into Nepal]
- Agricultural Improvement Duty
- Health Risk Tax
- Education Service Charge
- Road Construction Duty
- Road Repair and Improvement Duty [रू 4 per liter of Petrol and रू 2 per liter of Diesel imported into Nepal]
- Cinema Development Duty
- Pollution Control Duty [रू 1.5 per liter of Petrol and Diesel sold and distributed inside Nepal]
- Telephone Ownership Duty [रू 500]
- Telecommunication Service Charge [10%]
- Casino Royalty
- House Rental Tax is levied and collected through Local Level’s Finance Act. (There are 753 Local Level or Local Governments in Nepal and the house rental tax may vary from one local level to another. House rental taxes rates of 8%, 10% and 12% have been found across various local levels. It is to be noted that the constitution has provided the administrative division of Nepal into Federal, Provincial and Local Levels and hence the name Local Level is used for the reference here. Using the words such as local bodies, local agencies, etc. might be misleading)
The increment of Infrastructure Development Tax from Rs. 5 to Rs. 10 per liter on import of Aviation Fuel, Petrol and Diesel with effect from 2076/11/15 has been done by using the power provided by Section 9(1) of the Finance Act, 2076.
So any levying of taxes, duties, charges and fees must be rooted to the laws that provide for levying and collection of such taxes, duties, charges and fees. So, if a new type of tax is to introduced in the country, then the same has to be presented in the parliament and then will be effective once it is approved by both the House of Representatives (Lower House of the Federal Parliament) and National Assembly (Upper House of the Federal Parliament) and assented by the President.
#EMBF
[Note: All the date used in this article are in Bikram Sambat (B.S.), the national calendar used in Nepal which is about 56.7 years ahead of the Gregorian calendar system]