Fiscal Federalism Amendment in Nepal

No doubts, fiscal federalism is unarguably a potent economic strategy that can be used to maximize provision of public services as well as promote macroeconomic stability. Central to the success of fiscal federalization, is clarity in revenue and expenditure authority and responsibilities. The urgent reform that is required, is the need for government to redress the prevailing fiscal mismatch at subnational government levels through appropriate policies to increase tax revenues to subnational governments as well as reforms of expenditure responsibilities to enhance their efficiency in the provision of public services. But, premised on the analysis, it is deducible that the centralist system of fiscal relations, critical issue of over-dependence on direct tax revenue, conflicts over sharing principle and disharmonious federal-Province relations are obstinate challenges that are threatening harmonious fiscal relations in Nepal and the continued existence of Nepal as a federal state. Thus, this book investigates the problems inherent in the creation of federalism in Nepal.