Kathmandu. A large part of the revenue collected by the government annually is from the federal government.

According to the Fiscal Year 2082/83 presented by Finance Minister Dr Swarnim Wagle in the House of Representatives, the integrated revenue collection of the three tiers of federal, provincial and local levels increased by 11.4 per cent to Rs 1,281.70 billion in the last fiscal year 2081/82. Based on the revenue collected in the overall reserve fund and divisible fund, this increase is higher than the previous fiscal year. Such revenue collection had increased by 10.4 percent in the previous fiscal year 2080/81.

According to the Economic Survey, the share of revenue collected by the federal government is 92.1 per cent while the share of provinces and local levels is only 7.9 per cent. This shows that the federal government is still the main source of revenue collection. Out of the total revenue, tax revenue accounted for 87.1 per cent and non-tax revenue 12.9 per cent.

Similarly, the revenue in the reserve fund of the federal, provincial and local levels increased by 11.3 percent to reach Rs 1,272.75 billion in the fiscal year 2081/82. Of the total revenue, the share of federal reserve fund is 81.1 per cent, that of the provinces 8.4 per cent and that of the local levels is 10.5 per cent.

In terms of the government’s integrated income, the total income of the three tiers of governments, excluding the revenue to be distributed, increased by 10.4 percent to Rs 1,326.31 billion. Revenue accounts for 96 per cent of the total income. The share of foreign grants, other receipts and repayment of internal debt investment is four percent. In the fiscal year 2080/81, such income growth was 6.5 percent.

Similarly, the total receipts including revenue, grants, other receipts and public debt mobilization have increased by 15 per cent to Rs 1,782.4 billion. This amount is equivalent to 28.7 percent of the country’s gross domestic product (GDP). Of the total receivables, the share of the federal government is 86.3 per cent, that of the provinces is 6.1 per cent and that of the local level is 7.6 per cent.

The share of debt mobilization in total receipts was 25.6 per cent and revenue, grants and other income was 74.4 per cent.

In the fiscal year 2081/82, the revenue sharing among the three tiers of government has increased by 12.2 percent to reach Rs 501.10 billion. That’s 8.1 percent of GDP. Of this, Rs 492.16 billion has been allocated among the three tiers of government while Rs 8.94 billion is yet to be distributed, according to the Economic Survey.

The federal government has received 66.2 per cent of the total revenue shared by the federal government, 17.1 per cent by the provinces and 16.7 per cent by the local levels. Such revenue had increased by 5.8 percent to Rs 446.46 billion in the previous fiscal year.

The Value Added Tax (VAT) has the highest share in the revenue structure to be shared. Of the total revenue distributed in the last fiscal year, VAT accounted for 68.2 percent, excise duty (domestic production) 24.4 percent and other revenue including royalty 7.4 percent.

Thus, although the government data shows improvement in revenue collection, the autonomous revenue capacity of the provinces and local levels is still weak. As the federal government continues to be heavily dependent on total revenue, there will be challenges in the effective implementation of fiscal federalism.