Firstly, “no taxes shall be raised except in accordance with law”
Article 115(1) of the Constitution of Nepal, 2072 states the following provision: “No tax shall be levied and collected except in accordance with law.” This provision is a fundamental principle of taxation in Nepal and is designed to ensure that the process of imposing and collecting taxes is done in a lawful and transparent manner.
Let’s elaborate on its significance:
- Rule of Law: The provision emphasizes the principle of the “rule of law.” It means that taxation must be carried out based on legal provisions enacted by the competent authorities, rather than arbitrary decisions made by individuals or government officials. This ensures that taxation is fair, consistent, and predictable.
- Legislative Authority: The power to impose and collect taxes lies with the legislative body, which in Nepal is the Federal Parliament. Any tax or amendment to existing tax laws must be approved by the Parliament through a proper legislative process. This ensures that taxes are only imposed when deemed necessary and after thorough deliberation.
- Legal Clarity: The provision highlights the importance of clear and unambiguous tax laws. Tax laws should specify the types of taxes, their rates, exemptions, and the procedures for collection. This clarity helps taxpayers understand their obligations and enables tax authorities to apply the laws consistently.
- Tax Collection Procedures: The provision also covers the collection of taxes, ensuring that the process of gathering taxes from taxpayers is done in accordance with the law. Tax authorities must follow the prescribed procedures and rules while collecting taxes to maintain fairness and prevent abuse of power.
- Taxpayer Rights: By requiring taxes to be levied in accordance with the law, the provision protects the rights of taxpayers. It ensures that taxpayers are not subjected to arbitrary or excessive taxation, and they have the right to challenge any tax demands that are not in line with the law.
- Transparency and Accountability: The provision promotes transparency in tax matters. It requires tax authorities to be accountable for their actions, and any deviations from the law can be subject to legal review and scrutiny.
- Legal Challenges: If taxpayers believe that a tax has been imposed or collected unlawfully, they have the right to challenge it in a court of law. This provision provides a legal basis for taxpayers to seek redress and justice.
Overall, Article 115 underscores the importance of adhering to the rule of law in matters of taxation. It establishes the framework within which taxes are imposed, collected, and governed, ensuring that the process is fair, just, and accountable to the citizens and the constitution of Nepal.
What is a “Money Bill”?
In the context of the Nepalese constitution, a “Finance Bill” is a type of “Money Bill.” The term “Finance Bill” is specifically used to refer to a category of Money Bills that deals with financial matters, including taxation, government revenues, expenditure, borrowing, and other related financial obligations.
To clarify further, Money Bill, in the Nepalese context, a Money Bill refers to any bill that deals with the following subjects:
- Imposition, collection, abolition, remission, alteration, or regulation of taxes.
- Preservation of the Federal Consolidated Fund or any other Federal Government Fund, the deposit of moneys into and the appropriation or the withdrawal of moneys from such Funds, or the reduction, increment, or cancellation of appropriations or proposed expenditures from such Funds.
- Regulation of matters relating to borrowing of money or giving guarantees by the Government of Nepal, or any matter pertaining to the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of Nepal.
- Custody and investment of all revenues received by any Federal Government Fund, moneys acquired through the repayment of loans, grant moneys, or accounts or audits of the accounts of the Government of Nepal.
- Other matters directly related to any of the subjects specified above.
Notably, any bill shall not be deemed to be a Money Bill by the reason only that it provides for the levying of any charges and fees such as license fee, application fee, renewal fee or for the imposition of fines or penalty of imprisonment.
A Finance Bill is a specific type of Money Bill that focuses on financial matters, particularly related to taxation, public expenditure, government revenue, fiscal policies, and other financial regulations. It is introduced in the House of Representatives (the lower house) and follows the same legislative procedures as other Money Bills. The Finance Bill contains proposals for new taxes, amendments to existing tax laws, government expenditure, borrowing, and other financial measures.
To summarize, a Finance Bill is a subtype of Money Bill that specifically deals with financial matters and is introduced in the House of Representatives. Both Money Bills and Finance Bills must pass both Houses of the Federal Parliament and receive the President’s assent to become law.
What does the Constitution of Nepal, 2072 say?
Part 9: Federal Legislative Procedures of the Constitution of Nepal, 2072 provides the following several legislative procedures for a Finance Bill to become a Finance Act. The legislative process for any other kind of Money Bill is also the same.
Step 1: Introduction of Finance Bill
According to the constitutional provision, a Finance Bill must be compulsorily introduced in the House of Representatives (the lower house of the Federal Parliament of Nepal). This means that the initiation of any legislation related to financial matters, including taxation, revenue generation, government expenditure, and other fiscal policies, must start in the House of Representatives.
The provision also states that a Finance Bill can only be introduced as a government bill and not otherwise. In parliamentary systems like Nepal, government bills are those introduced by ministers or on behalf of the government, reflecting the government’s policy and agenda. Private members of parliament cannot introduce a Finance Bill; it is solely the prerogative of the government.
The reasoning behind these provisions is to ensure centralized control and coordination over matters of national finance. By requiring a Finance Bill to be introduced in the House of Representatives and exclusively as a government bill, it aims to maintain consistency and cohesiveness in the fiscal policies pursued by the government.
Step 2: Discussions in House of Representatives
The House of Representatives, as the more directly elected chamber of the Federal Parliament, represents the will of the people, and financial matters that impact citizens’ lives should be discussed and debated in this house. Moreover, the requirement for the Finance Bill to be introduced as a government bill reinforces the accountability of the executive branch to the parliament and the public in fiscal decision-making.
By following these procedures, the Finance Bill undergoes thorough scrutiny, debates, and discussions in the House of Representatives, allowing for a comprehensive examination of the country’s financial priorities and ensuring that the bill is in line with the government’s overall policy objectives.
Step 3: Transmission to National Assembly
In the specific case of a Finance Bill, which deals with financial matters as defined in the constitution, there are certain procedures for the passage of the Bills.
If a Finance Bill is passed by the House of Representatives (the lower house), it is then transmitted to the National Assembly (the upper house) for further consideration. The National Assembly must deliberate on the Finance Bill and has a maximum of fifteen days from the date of receipt to do so. Within this timeframe, the National Assembly can offer suggestions on the Bill to the House of Representatives. These suggestions are non-binding, meaning the House of Representatives can consider them but is not obligated to accept them. The Finance Bill is sent back to the House of Representatives.
Step 4A: If National Assembly comes with rejections or amendments to the Finance Bill
The House of Representatives may consider the suggestions made by the National Assembly. However, it has the authority to either incorporate the suggestions into the Finance Bill or reject them.
Step 4B: If National Assembly does not return the Finance Bill within time
If the National Assembly does not return a Finance Bill transmitted to it by the House of Representative within 15 days of the receipt, the House of Representatives may present the Bill to the President for assent.
Step 5: Passage of Bills
The Finance Bill, with or without the suggested amendments, is then presented to the President for assent. If the President is of the opinion that any Bill submitted for assent needs reconsideration, he or she may return the Bill to the House in which it originated within fifty days from the date of presentation of the Bill but the president is not allowed this right in case of the Money Bills. Then finally, the Finance Bill becomes an Act after the President gives assent to it.
What is "Finance Ordinance"?
In urgent situations when both Houses are not in session, the President, on the recommendation of the Council of Ministers, may promulgate an Ordinance. During the time when the Parliament is not in session, the government and the executive branch can still function and carry out their day-to-day administrative duties. However, certain circumstances may arise that require immediate action, such as enacting laws or issuing ordinances to address urgent matters. In such situations, the President, on the recommendation of the Council of Ministers (the executive body of the government), may exercise the power to promulgate ordinances.
The Ordinance has the same force and effect as an Act. However, it must be tabled at the session of both Houses held after promulgation, and if not passed by both Houses, it ceases to be effective. The Ordinance may also be repealed by the President at any time. If the Ordinance is not rendered ineffective or repealed by both Houses, it automatically ceases to be effective after sixty days from the day a meeting of both Houses is held.
The Finance Ordinance allows the government to take urgent financial actions when the Parliament is not in session, but it must be subsequently approved by the Parliament to remain in force as a permanent law. This process ensures that the Parliament retains its legislative oversight and authority over financial matters in the long run. Notably, the President has the authority to repeal the Finance Ordinance at any time, even before its consideration by the Parliament. This gives the President the power to revoke the ordinance if the circumstances that led to its promulgation no longer warrant its existence.
What is “Samayik Kar Asuli Ain, 2012”?
What if the bill does not translate into Act by the end of fiscal year? Obviously, several reasons could lead to the Finance Bill not being enacted before the end of the fiscal year, even if it is presented in the parliament at the specified time (i.e 15th of Jestha of every Fiscal Year). There could be several reasons for this: Delays in Parliamentary Proceedings, Disagreements and Amendments, Need for Further Deliberations, Political Considerations, Government Changes, Emergency Situations, Budget Complexity, Procedural Issues, Lack of Consensus or any Interference or Obstructions. It is important to note that these reasons may vary based on the specific political, economic, and social context prevailing in the country.
When the executive body of the country is vacant the constitutional procedure of Article 76 of the Constitution of Nepal, 2072 is applied. Also to be noted, ordinances can only be issued when the executive body exists and the parliament is not in session, but it cannot be issued in other situations listed above. Say for example – the deliberation on the Finance Bill in the House of Representative runs in length, extending well over into the next fiscal year. In such cases, the government may invoke its power for prompt tax collection from Samayik Kar Asuli Ain, 2012 – so that despite the lengthy deliberation, disagreements, political turmoils and procedural issues – the timely tax collection where deemed necessary is not hampered.
The “Samayik Kar Asuli Ain, 2012 (1955 AD)” सामयिक कर असुल ऐन, २०१२ is a historical legislative enactment originating during the reign of King Mahendra with the purpose of expediting timely tax collection. Remarkably, this legislation continues to be in effect to this day. It provides the Government of Nepal the right to issue “Notified Orders” published in the Nepal Gazette to “apply” or “increase” customs duty, excise duty, or any other tax when deemed necessary for public interest.
The Notified Orders become law from the specified date and remain in effect for a certain duration. The Notified Order becomes law from the “date specified” in the order. However, it ceases to be applied as law: (a) when the particulars of the orders are incorporated in law with or without amendment, (b) Once the government notifies in the Nepal Gazette that is shall not apply as law, (c) After the expiry of six months from the date of its publication. If the Notified Order is amended and becomes law with a lower rate than specified, the excess charged amount will be refunded. If the law has a higher rate than the Notified Order, the new rate will apply from the date of law enforcement.
The meaning of the terms “apply”, “increase” or “date specified” from Samayik Kar Asuli Ain, 2012 has been generously and liberally interpreted in the context of recent applications of this law. “Apply” and “Increase” has been altogether understood as any changes in the tax laws. Similarly, the term “date specified” has been arguably interpreted to mean the retrospective amendment of tax related laws. More on that on the examples in the paragraph below.
A little bit of History
Although the Government of Nepal always issues order using the power of Samayik Kar Asuli Ain 2012, every fiscal year, the situations in two particular fiscal years are quite interesting. Let’s take a look at them:
Finance Act, 2073 was enacted only on 2073/07/29. The changes in the relevant tax laws that are typically brought by the Finance Act for the period from 2073/02/15 to 2073/07/29 were applied through the Notified Order under the Samayik Kar Asuli Ain, 2012 on 2073.02.15.
When CPN (Maoist Centre) withdrew its support from the government in May 2021, reducing Oli’s second cabinet to a minority, and after the dissolution of the House of Representatives by President Bidhya Devi Bhandari on 2077.02.09, Oli’s second cabinet had “turned” into an interim government without parliament. For Fiscal Year 2078/2079 Finance Ordinance 2078 was issued on 2078/02/15 by Finance Minister Bishnu Prasad Paudel under the Cabinet of Prime Minister KP Oli’s Second Cabinet. After some political drama and legal diagnosis by the Supreme Court, Deuba’s Fifth cabinet was formed and only on 2078/05/23 the House endorsed the Financial Ordinance, 2078 BS amid protests by CPN UML. Since the decision from Supreme Court never did treat the parliament as “dissolved” and because the constitutionally required time period of 60 days requiring parliament to endorse the Ordinance had also elapsed on 2078/04/12, Finance Minister Janardan Sharma on on 2078/05/13 presented a Bill titled “नेपाल सरकारको अर्थ सम्बन्धी प्रस्तावलाई कार्यान्वयन गर्न बनेको विधेयक” that became effective since 2078/05/23 when it was endorsed & passed by the House of Representatives and finally became the “Finance Act” for 2078. However, this still didn’t give the validity for the tax law changes and tax increases for the period of 2078/04/12 to 2078/05/23, for which the government on 2078/05/25 through notice order invoked its rights under Samayik Kar Asuli Ain, 2012 and has issued notice order to that effect.
💡So in conclusion, let’s end with a question. When does the Finance Bill become effective?: Answer: The date from which the Finance Bill is assented by the President. All the provisions in the Finance Bill that are presented to be effective immediately are effective immediately following the assent of the President. However, some specific provisions of Finance Bill (as specified in the Bill) may be made effective immediately on presenting the bill to the parliament (ie. 15th of Jestha) by the power of notice order issued under Samayik Kar Asuli Ain, 2012.