The House of Representatives (HoR) has passed the Finance Act 2025, giving the government legal authority to implement the tax-related provisions outlined in the national budget for Fiscal Year 2025/26. The Act was endorsed during a HoR meeting held on Saturday through a majority vote, despite objections from several lawmakers.
Key Provisions of Finance Act 2025:
- Expansion of Tax Base:
Finance Minister Bishnu Prasad Paudel emphasized the Act’s intent to broaden the tax net, curb revenue leakages, and formalize informal businesses. - Health & Environmental Taxation:
- Pigouvian tax increased on alcohol and tobacco due to associated health risks.
- An additional 2% luxury tax imposed on gold and silver jewelry, sparking protests from jewelers and traders.
- Luxury & Green Tax Controversy:
Several lawmakers proposed scrapping or revising taxes such as the green tax and luxury tax on jewelry. These proposals were rejected by the HoR.
Reactions & Concerns:
- Finance Minister’s Defense:
Paudel described the raised concerns as “usual” and maintained that tax amendments were made only when “necessary”. He asserted the revised tax rates reflect both investor confidence and fiscal stability. - Lawmakers’ Criticism:
- Prabhu Sah: Criticized widespread misappropriation in revenue collection, despite an expanded tax base.
- Madhav Sapkota: Accused the government of failing to uphold social responsibility, calling the tax burden on ordinary citizens excessive.
- Demands from Parliamentarians:
- Eliminate or revise taxes that discourage domestic production.
- Implement progressive taxation by better targeting high-income individuals.
- Enforce pollution and environmental taxes more effectively.
Despite mounting pressure from stakeholders and lawmakers, the government appears committed to its existing tax policies as a foundation for fiscal discipline and economic reform in FY 2025/26.
