the poor shall eat 13% less – says Finance Act 2080

The picturesque country that is Nepal, mountains, hills and terai blah, blah, blah !!

Here is the truth about Nepal and it’s a truth from Nepali Kitchen, the truth about an unassuming tuber called “potato” that is not just any vegetable, but a symbol of sustenance and hope in Nepal. This important crop (second only to paddy, possibly) is rightly dubbed as the most important crop of Nepal as the “food of the poor Nepal” and engraved in most Nepali giving hearts a sad truth that is – दाल पनि किन्न नसक्ने गरिब नेपालीले खाने भनेको आखिर त्यहि आलुको झोल हो !!

In the face of your so-called “egalitarian-socialism oriented” government’s audacious move to impose a crushing 27% consumption tax (discussed below in detail) on our cherished potato, a fiery anger ignites within me, compelling me to unleash a passionate and critical outcry against this unjust decree. How dare they burden the sustenance of the poor with such an exorbitant tax on a staple that symbolizes hope and nourishment in our very Nepali soul ! This is not merely an economic imposition; it strikes at the core of our values and resilience, and a dominion of crony capitalists over the humble Nepali people. Because the truth is, in the ruthless grip of autocracy, shackles are not forged in the iron forge but rather cunningly woven through the dark threads of reduced economic freedom, big governments and exorbitant taxes !

And although the hero of this story is “potato”, the data, facts and theories equally applies to other many vegetables like onion, peas etc. and fruits like avocado, apple, quince, apricot, chery, strawberry, raspberry (including other currants and berries), kiwifruit, durian, persimmon, even coffee, cotton, and cereal flours other than wheat flour. These among other crops, fruits, vegetables, cash crops and agricultural produce have been subjected to additional 13% Value Added Taxes starting from 2080.02.15 by the decree of Finance Act, 2080 (to be understood with Notice Order under Samayik Kar Asuli Ain, 2012 issued on 2080.02.15). 

With that opening passage, let’s now look at the facts and data and the interplays of the politics, economics and the Kitchen. 

Why an exemption list for Indirect Taxes?

Indirect tax (like VAT, Sales Tax, Excise Tax and Customs Duties) is a type of tax that is imposed on goods and services rather than directly on individuals or businesses. It is called indirect because the tax burden is ultimately passed on to the consumer in the form of higher prices for the goods or services. Unlike a direct tax, such as income tax, property tax, capital gain taxes which is paid directly by the taxpayer to the government, an indirect tax is collected by an intermediary, typically a seller or a service provider. The intermediary collects the tax from the consumer at the point of sale and then remits it to the government.

As the burden of the indirect taxes are borne by the final consumer, indirect taxes are regressive in nature because they tend to impact low-income individuals disproportionately. Since these taxes are included in the prices of goods and services, individuals with lower incomes, who spend a larger proportion of their income on necessities, bear a higher tax burden as a percentage of their income. To mitigate this regressive nature of the indirect taxes there are certain goods and services that are often exempted or subjected to reduced rates of indirect taxes. These typically include basic necessities, medical and healthcare, education, financial services, public transportation, charity etc. The exemption of these items serves to redress the regressive nature of the indirect taxes because with such exemption serves to relieve all individuals from having to pay indirect taxes on basic necessities, which is more favorable to low-income individuals whose consumption mostly consists of basic necessities. We will discuss this regressivity of the indirect taxes in more detail below. 

Production Statistics of Nepal

Let’s start with an insightful chart to the world of Nepal’s agricultural landscape. This bubble chart showcases the production of crops, fruits, and vegetables aggregated from the fiscal years 2018/19, 2019/20, and 2020/21. Each bubble represents a distinct crop, with area indicating the production area in hectares. Revealing the fruit of farmers’ dedication, the production quantity and yield of production illustrate the nation’s prosperity and resourcefulness. 

Source data: 

  1. Agriculture Statistics – Ministry of Agriculture and Livestock Development 
  2. Real Sector – Nepal Rastra Bank 
  3. Annual Report – Department of Food Technology and Quality Control  

To navigate the chart use the filters on the right to view the specific statistics. That may be production area, production quantity or yield. A separate filter also exists for the type of the crop – that can be used in total or in particular.

Import Statistics of Nepal

With an aim to provide a comprehensive and data-driven analysis of Nepal’s import trends, considering both the global and granular perspectives. In these charts, we will explore the import patterns of Nepal over a span of 7 fiscal years.

Slide 1: Map Chart – Value of Imports from Each Country: The first slide showcases a map chart, which presents the value of imports from each country around the world to Nepal. The data encompasses every item group listed in the HS Code, offering a comprehensive overview of Nepal’s global trade relationships. Through this chart, we aim to identify key import partners and understand the significance of various goods imported into Nepal.
Slide 2: Bar Diagram – Import Trends by HS Code Items and Sub-items: On the second slide, we delve into the import trends of Nepal across the seven fiscal years for each item and subitem in the HS Code. This bar diagram allows us to spot patterns and shifts in import preferences over time.
Slide 3: Pie Chart – Imports by Country and HS Code Sub-items: Our final slide features an informative pie chart that illustrates the distribution of imports among different countries for each item and sub-item within the HS Code. With a focus on the seven fiscal years, this chart reveals the relative importance of trade partners for specific goods. By studying this pie chart, we can pinpoint critical markets for individual items and identify the potential impacts of geopolitical trade and import landscape.

Among the trades, to dissect few popular internal productions and imports of Nepal among various crops, vegetables and fruits: 


Internal Production

Import & Import Value (NPR)


5,500,000 Mt. Ton

555,000 Mt. Ton @ 17 Billions



580,000 Mt. Ton @ 31 Billions


2,800,000 Mt. Ton

540,000 Mt. Ton @ 19.7 Billions

Maize Flour & Cereals


14,100 Mt. Ton @ 0.9 Billions


2,100,000 Mt. Ton

191,000 Mt. Ton @ 6.3 Billions

Wheat Flour & Cereals


2,200 Mt. Ton @ 0.4 Billions


320,000 Mt. Ton

1,200 Mt. Ton @ 0.4 Billions


3,200,000 Mt. Ton

345,000 Mt.Ton @ 8.5 Billions


418,000 Mt. Ton

50,000 Mt. Ton @ 0.8 Billions

Tomato Preparations


850 Mt. Ton @ 0.2 Billions


288,000 Mt.Ton

175,000 Mt. Ton @ 6.5 Billions


73,000 Mt.Ton

10,500 Mt. Ton @ 1.2 Billions

Peas (Pigeon pea, Grass pea,
Cow Pea and other Peas)

132,000 Mt.Ton

124,000 Mt. Ton @ 9.3 Billions


42,000 Mt.Ton

90,000 Mt.Ton @ 7.3 Billions


2,000 Mt.Ton

45 Mt.Ton @ NPR 15 Millions

And so on. There is no point in repeating what already is available in the above two charts. One small caveat to the summary noted in the table above: The data are collected from the charts above in average and approximate figures. For detailed and exact figures, refer to the labels and tooltips in the charts above. The figures have been aggregated including the dried products, in case of fruits – which may skew the comparison of the internal production and import in quantities.

Changes brought by Finance Act 2080 in VAT Act, 2052 Exemption List

Many items in the exemption list of the VAT Act, 2052 were removed by the Finance Act, 2080 including air travel service originating and ticketed from Nepal, but here we will only focus on the items that are crops, vegetables or fruits – consistent with the topic at hand. 

To summarize, the following items were removed from the VAT exemption list, now attracting VAT on their trade:

  1. Vegetables: potato, onions, shallots, frozen vegetables, dried onions
  2. Fruits: avocado, apple, quince, apricot, few cherries, strawberry, raspberry (including other currants and berries), kiwifruit, durian, persimmon, 
  3. Others: decaffeinated coffee, cereal flour (both whole grain and refined flour) other than wheat and meslin
  4. Medical Herbs: ginseng root, coca leaf, poppy straw, ephedra
  5. Others: cotton, kerosene, frozen meat and offals 

To view all the changes in the Schedule 1 / Exemption List of VAT Act, 2052 refer the the document here: Amendments in Tax Laws Made by Budget 2080/81 – SAR Associates 

Indirect Taxes on Agricultural Imports - now ≥ 27%

Generally in the case of agricultural imports, the customs duties are not applied when imported from India or Tibet through land route, and the applicable customs duties generally range between 10 to 20 % (not in all cases). However, a separate indirect tax called “Agriculture Reform Fee” (ARF) is applied on agricultural imports, except when they are imported from sea. Since most of the agricultural products imported into Nepal originate from the land route of India, ARF at the rate of 9% is applicable on such imports even when custom duties are not applicable. For detailed reference to the import duties refer the Integrated Customs Tariff: Integrated Customs Tariff – Department of Customs 

On top of that, although not indirect tax per se, an advance tax at the rate of 5% is withheld at the point of the customs. Section 95Ka(7) of the Income Tax Act, 2058 provides that: 

  1. 5% withholding is made on custom value at the custom point by custom office on import of:
    • Custom Banding Category 1 (Live Animals): राँगा, भैसी, खसी, बोका, भेडा, च्यांग्रा
    • Custom Banding Category 3 (Fish And Crustaceans, Molluscs And Other Aquatic Invertebrates): जीवित, ताजा तथा हिमकृत गरिएको माछा
    • Custom Banding Category 6 (Live Trees and Other Plants; Bulbs, Roots and The Like; Cut Flowers And Ornamental Foliage): ताजा फूलहरु
    • Custom Banding Category 7 (Edible Vegetables and Certain Roots and Tubers): ताजा तरकारी, आलु प्याज, सुक्खा तरकारी, लसुन, बेबी कर्न
    • Custom Banding Category 8 (Edible Fruit and Nuts; Peel of Citrus Fruit or Melons)
  2. 2.5% withholding is made on custom value at the custom point by custom office on import of:
    • Custom Banding Category 2 (Meat And Edible Meat Offal): मासु
    • Custom Banding Category 4 (Dairy Produce; Birds’ Eggs; Natural Honey; Edible Products Of Animal Origin, Not Elsewhere Specified Or Included): दुधजन्य पदार्थ, अन्डा, मह
    • Custom Banding Category 10 (Cereals): कोदो, फापर, जुनेलो, चामल, कनिका
    • Custom Banding Category 11 (Products Of The Milling Industry; Malt; Starches; Inulin; Wheat Gluten): मैदा, आँटा तथा पिठो,
    • Custom Banding Category 12 (Oil Seeds And Oleaginous Fruits; Miscellaneous Grains, Seeds And Fruit; Industrial Or Medicinal Plants; Straw And Fodder): जडिबुटी, उखु
    • Custom Banding Category 14 (Vegetable Plaiting Materials; Vegetable Products Not Elsewhere Specified Or Included): वनस्पतिजन्य उत्पादन

On top of that with the application of 13% VAT on several of the items as listed above, the rate goes to (≥ 9% + 5% + 13% =  ≥ 27%), of which a major part of the burden is borne by the consumers and kitchen in form of increased prices.  

💡Average Rate Custom Duty Collection in Nepal
The average rate of custom duty in Nepal has been maintained at around 25% of the value of the import. See the statistics of the foreign trade here: Statistics of Foreign Trade – Department of Customs. A study conducted by the World Food Programme about more than a decade earlier showed that the average tariff rate of Nepal was around 15%, link here – Food and Agricultural Markets in Nepal. This increased dependency of the economy in the import taxes could be viewed as quantitative restriction on the free trade policies of the country when compared with other nations. But Nepal’s hands are tied as the offsetting export figures of the country are very infinitesimal.

Agricultural intermediaries in Nepal are total Sharks

According to a report by Emerald Publishing, small farmers in countries like Nepal face several issues in the supply chain, starting from the field to the market. The entire supply chain is dominated by intermediaries, who play an exploitative role in the process. This is supported by a report by the International Labour Organization (ILO), which states that agricultural workers in Nepal face challenges such as low wages, long working hours, and a lack of social protection. The report also highlights the need for better information sharing and cooperation between stakeholders to address these issues.

The Food and Agriculture Organization (FAO) also acknowledges the importance of intermediaries in the agricultural supply chain. In a report on agricultural and food marketing, the FAO identifies intermediaries as key players in the chain of activities that connect food and agriculture. However, the report notes that these players often have conflicting interests, which can lead to exploitation of farmers. A report by Harvard Business School also highlights the challenges faced by farmers in agricultural supply chains in developing economies, including extreme levels of poverty.

Based on the available research, there are some specific ways in which agricultural intermediaries exploit farmers in Nepal. Intermediaries often purchase crops from farmers at low prices and sell them at higher prices in the market, resulting in a significant difference between the price paid to farmers and the price received by intermediaries. Intermediaries charge high marketing margins, which is the difference between the price paid to farmers and the price received by intermediaries. This results in a lower profit margin for farmers. Some intermediaries have been reported to harass and cheat farmers, particularly those who are uneducated and lack knowledge of market prices. Intermediaries often lack transparency in their dealings with farmers, which can lead to confusion and mistrust. Farmers often have limited access to markets due to a lack of transportation and infrastructure, which makes them dependent on intermediaries.  


  1. Small-holding farmers and exploitative role of intermediaries – ILO
  2. Agricultural Workers And Their Contribution To Sustainable Agriculture And Rural Development – ILO
  3. Agricultural and Food Marketing Management – FAO
  4. Intermediation in the Supply of Agricultural Products in Developing Economies
  5. Are marketing intermediaries exploiting mountain farmers in Nepal? A study based on market price, marketing margin and income distribution analyses – ScienceDirect 
  6. Food and Agricultural Markets in Nepal – WFP 

The two charts in sections above, provide the value of the agricultural import and the quantity of import as well as internal production which can be selectively used to calculate the consumption market size of Nepal. For price information we can refer to the average prices released by the Kalimati Fruit and Vegetable Market Development Committee. Annual report data of the committee are available here: Annual Reports – कालीमाटी फलफूल तथा तरकारी बजार विकास समिति. The extent of the margin in the vegetables and fruits products ranges well over 100% to 1000% of the cost – even in the case of imported goods, but since the inferences are relational and contextual – I would leave that to the reader for self-analysis. 

Nepal’s journey towards food sufficiency is a challenging one, with limited cultivable soil and low productivity growth hindering domestic food production. However, our nation finds its dependency in foreign supply, particularly from India, to complement our food needs. While private sector-led food supply management is dominant, it often struggles to reach remote areas due to difficult terrain and weak road connectivity, leading to high transportation costs and limited access for private traders.

The lack of functioning markets in hilly and mountainous regions is a concern, but the government’s public market intervention through subsidized prices becomes a vital lifeline for those communities. Despite a relatively competitive food grain market, the concentration of trade in the hands of a few large millers-traders poses risks to the flow of food trade. As farmers, we face challenges as price takers in the market due to small marketable surpluses and the absence of cooperatives in food grain markets. Nonetheless, we are determined to contribute to this intricate market channel, working alongside kantawalas, rice millers, importers, wholesalers, and retailers, all interconnected in this system.

And also, we seriously lack data – the blasted data – where are they? Consumption related data, collection and consumption centers data, data on the wastages of the internal and imported products, informal cross border imports of the border cities in the terai, the undervaluation for the purpose of import and so on. Accurate information is crucial for informed decision-making, and it is essential to account for imported or purchased goods alongside production figures. 

Does Nepal even have a progressive tax system?

In the chart below, we dive into the financial landscape of Nepal’s government revenue over the past two decades, spanning from the fiscal year 2002/2003 to 2020/2021. As a vital indicator of the nation’s economic health and fiscal policies, government revenue provides valuable insights into the sources of income that sustain the country’s development and public services.

Slide 1: The first slide of the chart provides a comprehensive overview of the total revenue collected by the Government of Nepal during the specified period. We analyze the revenue from various sources, classifying them into three key categories: direct taxes, indirect taxes and other government revenues.
Slide 2: The second slide presents the same government revenue data but in a 100% stacked format. By using this format, the chart aims to provide a clearer understanding of the proportional contributions of each revenue category over the years.

💡Why do many countries implement indirect taxes? 
Countries often prefer indirect taxes for several reasons, as these types of taxes offer certain advantages and can align with specific economic and social objectives. Some of the primary reasons why countries may opt for indirect taxes include:  

  1. Broad-Based Revenue Generation: Indirect taxes, such as value-added tax (VAT), sales tax, excise duty and customs duty are typically levied on a wide range of goods and services. This broad base allows for a more extensive revenue generation, spreading the tax burden across a larger segment of the population and economy.
  2. Ease of Collection and Compliance: Indirect taxes are usually easier to administer and collect compared to direct taxes, which may require more complex reporting and assessment procedures. Retailers or service providers act as tax collectors, making compliance more straightforward, reducing tax evasion opportunities.
  3. Non-Intrusiveness: Indirect taxes are less intrusive into individual financial matters compared to direct taxes, which require the disclosure of personal income and assets. This reduced intrusiveness can lead to higher acceptance among taxpayers.
  4. Encouragement of Savings and Investment: By taxing consumption rather than income, indirect taxes may encourage savings and investment. High-income individuals who save more and consume less may bear a lower tax burden relative to their income.
  5. Incentive for Formal Economy: Indirect taxes are applied to goods and services consumed in the formal economy, promoting businesses to register and operate legally. This can lead to increased formalization and greater tax compliance.
  6. Revenue Stability: Indirect taxes can provide a more stable revenue stream for the government as they are less affected by fluctuations in individual incomes. Even during economic downturns, people tend to continue consuming essential goods and services, contributing to a more stable tax base.
  7. Trade and Border Control: Indirect taxes, such as customs duties, can be used to control imports and exports, protecting domestic industries and promoting local production.

Despite these advantages of implementation of indirect taxes, it is very necessary to maintain a balance between the sources of direct taxes or indirect taxes, because indirect taxes are by nature regressive in nature and it is not able to address income inequality. Nepal’s overdependence on the indirect sources of taxes clearly shows that the regressivity of the indirect taxes are clearly offsetting the only progressive tax rates – that is individual’s tax rate. We will discuss more about this regressivity in section below. 

Problems of VAT Application on Potato and Onions

Indirect Taxes and Regressivity

The indirect tax system’s regressivity is a complex issue, with the incidence of taxes being influenced by demand and supply elasticity for specific goods or services. In cases where goods have elastic demand and inelastic supply (eg. luxury goods, professional services, real estate etc.), the tax burden primarily falls on producers, whereas goods with inelastic demand and elastic supply (eg. basic food staples, electricity, basic medications, raw materials etc.) mainly burden consumers. The application of indirect taxes therefore intentionally or unintentionally, as economic subjects may alter their market behavior, affecting consumers, employees, or owners.

The regressive impact of indirect taxes on income distribution is a significant concern. Since these taxes are levied irrespective of consumer income, individuals with lower income end up bearing a higher effective tax rate, spending a larger proportion of their income on taxed goods compared to higher-income individuals. The degree of regressivity varies among countries and depends on the type of indirect tax. Empirical evidence indicates that excise taxes, such as those on alcohol and tobacco, are generally more regressive than value-added taxes (VAT).

Despite their regressivity, indirect taxes like excise duty are considered attractive for their corrective nature because they raise revenue and curb consumption of goods with negative externalities, such as tobacco, alcohol etc. These taxes can correct market failures and reduce the reliance on more distortionary taxes. Additionally, excise taxes can be tailored to impose tax burdens on those causing negative externalities or benefiting from government services, making them a useful tool for policy objectives. But it still doesn’t have progressive nature – this is the very reason why basic staples and necessities are exempted from the application of VAT. 

In the comprehensive chart below we will view the diverse income sources of the governments from all over the world, each expressed as a percentage of the total. From the slider at the top left of the chart we will see various categories of the income  like direct taxes levied on individuals and corporations, grants and other revenue, interest payments,  social contributions, taxes on goods and services, taxes on international trade and other levies. This will enable us to understand the composition of the government revenues and compare this with the aggregates with countries all around the world. 

Compliance Requirements

After the introduction of the provision for applying Value-Added Tax (VAT) on potatoes and onions, traders of agricultural produce now face added compliance requirements relating to VAT registration. With the implementation of VAT, these essential food items have been brought within the purview of the tax regime, necessitating traders who have annual turnover over 5,000,000 per annum to register as VAT vendors and maintain meticulous records of their transactions. 

The inclusion of potatoes and onions in the VAT system has introduced complexities in pricing strategies, as traders now need to factor in the tax implications while setting selling prices, which is certain to increase the prices of these products as they reach the consumer’s kitchen. Additionally, traders will now be required to file regular VAT returns and remit the collected taxes to the government, adding to their administrative burden, cash burden and at times during the peak season of these goods when the goods have relatively elastic demand, this could also mean for the traders and farmers alike to eat certain portion of VAT into their cost – in addition to the added compliance requirement, altering the operational and financial landscape of the intermediaries involved in the trade of these goods. 

The compliance costs for Value-Added Tax (VAT) can be a significant burden on businesses. Although we do not have specific figures for Nepal, in the UK, these costs have been estimated to be around 4% of the total revenue generated from VAT. However, compliance costs are even higher for smaller businesses. These costs refer to the expenses incurred by businesses in ensuring they comply with the complex VAT regulations, including record-keeping, filing returns, and administrative tasks. The higher burden on smaller businesses can be attributed to their limited resources and capacity to handle the complexities of VAT compliance. Overall, these compliance costs can impact businesses’ profitability and operational efficiency, particularly for smaller enterprises. Source: Institute for Fiscal Studies – UK 

Claim for Losses and Wastages

Section 16Kha of the VAT Act, 2052 and Rule 39Ka of the VAT Rules, 2053 provides provisions for tax deduction on damaged goods in vatable businesses. In the event of loss and damage of goods due to arson, theft, accident, wear and tear or disruptive activity, tax paid on the purchase of goods can be claimed as per the prescribed procedure.

If any item becomes damaged or unusable, a request must be submitted to the tax authority within a specific timeframe to claim tax deduction for such items. For cases involving loss or damage due to events like arson, theft, accident, vandalism, or destructive activities, the request must be made within 30 days from the date of occurrence. Additionally, for expired items, the request should be filed by the 25th of the end of the specific fiscal quarter. The tax officer will examine the application and may grant approval for the deduction of Value-Added Tax (VAT) paid on these losses and damages.

Inherently, the trade of goods like potato and onions will obviously entail significant losses (both normal and abnormal), wastages, expiries and even pilferages. The provision of claiming VAT credit for such incidents is itself not under a self-assessment system, this has to be brought to and reviewed by the concerned tax officer and the taxpayer can claim such tax credit only when it has been deemed reasonable by the tax officer.

The impacts of this provision on traders can be significant. Firstly, the requirement to submit a request and seek approval from the tax officer can be time-consuming and administratively burdensome for traders already dealing with losses and damages. Additionally, the uncertainty of whether the tax officer will approve the tax credit claim creates a sense of unpredictability and may discourage traders from pursuing the process altogether. Furthermore, the inability to claim VAT credit under a self-assessment system adds an extra layer of complexity and reliance on the subjective judgment of the tax officer. This may lead to inconsistencies in the application of the provision and leave traders unsure about the outcome of their claims and in case of disagreements more burdensome process of applying for administrative review of the authority’s and appeal to the revenue tribunal might have to be made, depending on the situation – the uncertainty surrounding VAT credit claims can impact their profitability and cash flow.

Deadweight Losses

The application of VAT on potatoes and onions in Nepal is likely to have significant impacts on these inelastic products. Drawing on Adam Smith’s concept of the Invisible Hand and the concept of deadweight loss, this decision may prove to be unfavorable for both the economy and the consumers.

When VAT is applied to potatoes and onions, the increased price for these essential goods will result in reduced quantity of goods traded. As a consequence, some consumers who heavily rely on these products, particularly low-income individuals, will be worse off. The intermediaries in the market may be encouraged to hoard and increase the prices of these inelastic products. As the market is not operating freely, and poor consumers’ economic well-being is likely to be compromised.

Moreover, the concept of deadweight loss comes into play, which highlights the inefficiency of the tax. Deadweight loss occurs when the decrease in consumer surplus and producer surplus outweighs the government’s income from the tax. Since potatoes and onions are basic necessities with inelastic demand, consumers may continue to purchase them despite the price increase. As a result, the burden of the tax falls heavily on consumers, leading to reduced purchasing power and potentially impacting their overall standard of living. While VAT can generate tax revenue for the government, if this income is not put to productive use or does not lead to positive externalities, it only exacerbates the deadweight loss problem. Inefficient taxes hinder economic growth and impede the market’s ability to allocate resources optimally.

Also, applying VAT on essential food items like potatoes and onions could also lead to potential social repercussions, as these products play a crucial role in food security and affordability for the general population.

In conclusion, the decision to apply VAT on potatoes and onions in Nepal may lead to undesirable consequences. By disrupting the market’s natural balance through taxation, the government risks inflicting a deadweight loss that outweighs the tax income. This can adversely affect both the economy and the well-being of consumers, particularly those with limited financial means. Considering the importance of these items in daily life, it might be prudent for the government to reassess this decision and explore alternative strategies for revenue generation that do not burden vulnerable sections of the society – but maybe we missed that train already.

Parliamentary Practice in Nepal: Synchrony in Idiocracy

After the Finance Bill 2080 was presented on 2080.02.15 – two month long discussions were made in the parliament and what came of it? Nothing at all. 

The Finance Bill 2080, presented on 2080.02.15, underwent a rigorous two-month-long parliamentary discussion, yet no amendments were made to this provision. During the deliberations, some representatives, including Sumana Shrestha, Manish Jha, Ganesh Parajuili from the Rashtriya Swatantra Party, and Gyanendra Shahi from the Rastriya Prajatantra Party, voiced their opposition to this provision and sought its removal. However, it is worth noting that historically, no alterations have been made to the Finance Bill in Nepal, not even punctual amendments. This also sparks significant concern and raises questions about the parliamentary practices in Nepal. This lack of responsiveness to legitimate concerns and the historical pattern of no amendments being made to the Finance Bill calls into question the effectiveness and transparency of the legislative process in Nepal.

Moreover, the imposition of VAT on basic necessities like potatoes and onions, which are essential for the daily sustenance of the population, requires careful evaluation of its impact on vulnerable sections of society. Such a decision may have far-reaching consequences on food security, affordability, and overall well-being. Therefore, the failure to address these concerns in the legislative process raises questions about the government’s commitment to protecting the welfare of its citizens. No doubt this has led to a perception of the government’s disregard for public concerns and a lack of accountability on the part of the government.

Betraying consumers and hiding in farmer’s pocket

Dr. Prakash Sharan Mahat better hide in his big brother – Dr. Ram Sharan Mahat’s pocket, after the justification he gave regarding the application of VAT on potatoes and onion. Dr. Prakash Sharan Mahat’s justification for implementing VAT on potatoes and onions is nothing short of appalling. Despite having the privilege of hiring three PhDs and several economists as Ministers of Finance in our history, the way they make economic decisions is dreadfully disappointing. It is incredulous that after extensive discussions in the public, press, and parliament, and with all the voices and concerns raised, Finance Minister Dr. Mahat has the audacity to defend the provision by claiming it will benefit farmers in Nepal by discouraging imports. This is an utter betrayal of consumers who will face increased prices while the Minister seems to conveniently hide in the pockets of the farmers. How can such a decision be justified when it directly impacts the general populace’s well-being and adds financial burdens to their daily lives? 

Just few simple things – apparently everyone in drafting the Fiscal Bill failed to understand: 

  1. Potatoes and Onions are inelastic goods, thus indirect tax application will bring income disparity because of the regressivity of the VAT
  2. The way to discourage import is by levying Import Duties, that are more likely to be directly sustained by the agricultural intermediaries rather than VAT which mostly is the burden of the consumers to bear
  3. The way to encourage farmers in Nepal is to source their produces and bring them to the consumer market – not by taxing the consumers and by ensuring the price regulation mechanism in the basic staples that benefits both producers and consumers
  4. Establishing government funded country wide market networks for sourcing, marketing, distribution and warehousing of the fruits and vegetable produces and imports and thereby unshackling the agricultural economy from the private network of agritultural intermediary sharks 

Thank you for reading this long read !!