By P.R. Pradhan
Nepali citizens pay a heavy tax to the government, with the overall tax burden often estimated at around 30 percent of income and consumption. Yet citizens complain that they receive inadequate public services and weak institutional performance. The question is where that revenue goes and why citizens receive so little in return.
Before becoming Finance Minister, Swornim Wagle, then a leader of the Rastriya Swatantra Party (RSP) who had presented himself as an economist returning from abroad, criticized the contradiction between high taxation and poor government services. Today, however, as Finance Minister, the situation has yet to fundamentally change. Instead, the government has continued to emphasize widening the tax net and increasing revenue collection, adding to the perception that ordinary citizens are being asked to shoulder an ever-growing burden without receiving corresponding improvements in services.
This is the real problem facing Nepal.
The issue cannot be solved merely by changing the Finance Minister, appointing a new Prime Minister, promising good governance or launching another anti-corruption campaign. Nepal is operating an expensive political system with multiple layers of elected institutions. The cost of maintaining this structure is ultimately borne by taxpayers.
The present political system emerged from the framework created by the 12-point understanding reached in Delhi. It has increased Nepal’s political and economic dependence on external power centres and weakened the country’s traditional institutional structures. Regardless of that interpretation, the question is: Can a poor country like Nepal sustain such an expensive political structure indefinitely?
A country’s economic strength is closely linked to its political stability, institutional efficiency and national independence. If a state continually spends more on administration and political structures than it can generate through its domestic economy, it becomes increasingly dependent on foreign assistance, loans and remittances. Such dependence can undermine economic sovereignty and political independence.
The present debate should therefore focus on the size and cost of the state itself.
Do we really need a Federal Parliament of 334 members—275 members in the House of Representatives and 59 in the National Assembly? Do we need seven provincial assemblies comprising 550 members? In addition, Nepal has 77 district coordination committees and 753 local governments. Each layer requires offices, staff, salaries, allowances and other facilities.
The issue becomes more serious when the privileges and expenses associated with elected representatives are taken into account. Representatives at different levels receive salaries, allowances and various facilities. There are also concerns that political leaders use public resources to appoint close associates and supporters to various positions. Across all levels, these expenditures become a substantial burden on the treasury.
The question is simple: Can Nepal’s domestic revenue adequately sustain this enormous political and administrative structure?
If the answer is no, continuously expanding the tax base cannot be the only solution. The government cannot indefinitely ask citizens to pay more taxes to finance an expensive system. Before imposing additional burdens on taxpayers, the state must examine its own expenditure, eliminate unnecessary institutions and reduce political and administrative overheads.
Therefore, we believe Nepal cannot achieve sustainable prosperity without addressing the fundamental weaknesses of the present political system. More than a decade of experience is enough to evaluate whether the federal republican model has delivered the prosperity, stability, good governance and national unity promised.
If we want a prosperous, strong and unified Nepal, we must be prepared for a fundamental political debate. In our view, this should include reconsideration of the present constitutional arrangement and serious discussion about restoring the 1990 Constitution, which provided space for different political forces while guaranteeing fundamental rights.
The country does not merely need another Finance Minister, another Prime Minister or another anti-corruption campaign. It needs to ask where the problem actually lies—and whether the political system itself has become too costly for the economy that sustains it.
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