The study concluded that historically regressive tax systems have increased social inequality by placing the main burden on workers and the poor.
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A study has shown that there is still a lack of justice in Nepal's tax system, public services and social security structure. The report concludes that social inequality is deepening due to the failure to make the tax system fair and progressive.
The study titled 'Justice in Tax System, Public Services and Social Protection in Nepal: An Assessment and Way Forward' has shown that the tax system, which is the main source of income for the state, has played an important role in social services, infrastructure development, poverty reduction and economic stability. However, the study has concluded that how tax policy is formulated and who bears its burden determines equality or inequality in society. The study was jointly conducted by economist Dilliraj Khanal and tax expert Kul Prasad Pandey.
The study found that Nepal's tax system was historically regressive in nature, with the direct burden mainly falling on the poor and working class. Although many countries around the world prioritized progressive tax systems after World War II, the report states that after the 1980s, there was a renewed trend towards regressive tax systems with neoliberal economic policies.
‘Especially since the global financial crisis of 2008/09, the increasing income and wealth inequality has intensified the debate on justice in the tax system,’ the report states, ‘The need for a progressive tax system has been raised more strongly in recent years, concluding that high inequality hinders sustainable economic growth and social development.’
The study shows that Nepal has pursued tax reform policies along with economic liberalization since the 1980s. However, it is only after the political changes of 2062/63 that policy efforts to prioritize inclusive and equitable development have come to the fore. In this process, the study concludes that the goal is not only to increase revenue collection, but also to maintain equality in the tax system and expand public access to public services.
The study describes the expansion of the social security budget as a positive initiative by the government. The report points out that despite the policy commitment to increase access to public services targeting women, the poor and low-income communities, its implementation is still weak.
The study, which focused on the interrelationship between poverty, inequality, the quality of public services and the tax system, was conducted at the local level and discussions were held with stakeholders. The report, which was prepared using both qualitative and quantitative methods, points out the need for immediate policy reforms to make the tax system more equitable and expand access to public services and social security.
