Before being appointed Finance Minister, Swornim Wagle had criticized Nepal’s taxation policy, stating that the government was collecting taxes like Norway but providing services to taxpayers like Somalia. His argument was that citizens and businesses were being burdened with high taxation while receiving inadequate public services. He had emphasized the need for fundamental reform. Ironically, as Finance Minister, Wagle presented the national budget for fiscal year 2026/27, but the budget appears to have continued the same old practice of prioritizing revenue collection over meaningful relief for taxpayers. Understandably, the present failed system has severely impacted the economy as the unproductive sector expenditure is higher than the revenue that the government collect.
Nepal’s economy has been struggling for several years due to multiple challenges. The Covid-19 pandemic severely affected economic activities in 2020, and just as the economy was beginning to recover, geopolitical tensions, including the Israel-America war on Iran, pushed up global petroleum prices, further affecting Nepal’s economy. Investors have been seeking policy support and relief measures, but the government appears more focused on increasing revenue through additional taxation.
Although Nepal frequently highlights tourism development as a national priority, the government has imposed VAT on travelers, making air tickets more expensive. Airline operators have also raised concerns over taxes on aircraft purchases and the import of essential spare parts. According to industry representatives, such policies have discouraged airlines from expanding their fleets. As a result, domestic passengers face higher fares, airlines have reduced flights to several destinations, and people in remote areas are suffering from reduced air connectivity.
During the Panchayat era, the government had directed Royal Nepal Airlines to generate profits from international operations while maintaining domestic services compensating the airfare. At that time, the national flag carrier was profitable. However, after 1990, political interference and alleged misuse of state institutions gradually weakened the airline. Recently, former Indian government secretary Anil Swarup questioned how Nepal could promote tourism without improving the performance of its national carrier. Once regarded as South Asia’s leading airline, the flag carrier has now become a victim of the political exploitation.
Discussions with investors across various sectors reveal growing frustration over Nepal’s investment policies. Many question whether the country currently offers a reliable and competitive environment for investment. Without policy stability, investor confidence, and a business-friendly taxation system, achieving sustainable economic growth will remain a major challenge.
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