KATHMANDU: Revenue collection in the first month of the fiscal year under Finance Minister Dr Swarnim Wagle’s budget has shown little improvement compared with previous years, raising concerns over the government’s ambitious revenue target.
According to the Financial Comptroller General Office, the government collected Rs92.22 billion in revenue in Shrawan, equivalent to 5.84% of its annual target. Collection was Rs7.44 billion higher than the Rs84.78 billion recorded in the same month last year.
However, the growth remains broadly in line with the trend of recent years. Revenue collection in Shrawan accounted for 5.76% of the annual target in fiscal year 2022/23, 5.54% in 2023/24 and 6.68% in 2024/25.
The bigger concern is the size of this year’s target. Of the Rs2.124 trillion budget, the government plans to raise Rs1.58 trillion through revenue. On an average monthly basis, this requires collection of around Rs131.66 billion.
Last fiscal year, the government collected Rs1.241 trillion in revenue. The new target is therefore Rs339 billion, or 27.31%, higher than last year’s actual collection. But revenue growth in Shrawan was only around 9%, indicating that meeting the annual target could be difficult if the trend continues.
Under-invoicing remains a major challenge
Officials at the Finance Ministry identify unauthorised trade and under-invoicing of imports as major causes of revenue leakage. Declaring imported goods at prices below their actual value reduces not only customs revenue but also income tax, VAT and excise collections.
The widespread practice of conducting transactions without issuing proper invoices also continues to undermine tax collection.
To address the problem, Finance Minister Wagle has introduced a taxpayer incentive programme aimed at encouraging consumers to demand official invoices. However, some ministry officials argue that stronger enforcement at customs points and direct market intervention would be more effective than incentive schemes.
Weaknesses within the revenue administration have also contributed to poor collection, officials say. Allegations of collusion between customs and revenue officials and businesses have persisted, while tax authorities have struggled to increase collection in line with the government’s ambitious target.
Unauthorised trade through Nepal’s open border with India remains another major source of revenue leakage. Despite accounting for a large share of Nepal’s imports, the open border makes smuggling easier and difficult to control effectively.
Weak capital spending adds pressure
Low capital expenditure is another factor affecting revenue mobilisation. The federal government spent only Rs1.32 billion on capital projects in Shrawan.
Weak public investment limits economic activity, market transactions and private-sector income, ultimately reducing tax revenue.
With under-invoicing, unauthorised trade, weak tax administration, a narrow tax base and sluggish capital spending continuing to weigh on collection, the government faces a significant challenge in achieving its Rs1.58 trillion revenue target for the current fiscal year.
