How Will Prime Minister Balen Shah’s Decision to Not Implement Equity Tax on Private Education and Health Be Enforced?
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Following widespread criticism, the government has withdrawn its decision to impose the ‘equity tax’ on the private education and health sectors.
Prime Minister Balendra Shah ‘Balen’ announced on social media Tuesday afternoon that the three percent equity tax will not be implemented at this time.
The government made this decision 53 days after the budget was presented, in response to strong public criticism, especially against private hospitals beginning tax enforcement from the first of Shrawan.
Although most government decisions are typically announced through the Prime Minister’s Secretariat, this time the decision was shared directly via the Prime Minister’s social media account.
On Jestha 15, Finance Minister Swarnim Wagle had declared the levying of a three percent equity tax on private education and health.
Prime Minister Shah explained that after consultations with the Finance Minister, the decision was made not to implement the tax. Deepa Dahal, the Prime Minister’s press and research officer, confirmed this in an interview.
What Is the Reason Behind the Decision?
“If the 3 percent equity tax is applied to private education and health at this time, the general public would face increased expenses and disappointment,” the Prime Minister wrote.
“Therefore, after consulting with Finance Minister Swarnim Wagle, a decision was made not to implement the equity tax on education and health for now.”
Although the goal is to broaden the tax base and regulate the economy, the government has been attentive to citizens’ reactions to taxation, said the Prime Minister. He added, “We will progress by listening to the demands of the citizens and our commitment to building an equitable society remains unwavering and clear.”
The Prime Minister also expressed a commitment to correcting any government decisions if dissatisfaction arises.
“Every government decision is and will be made with the citizens’ welfare at the center. If citizens express dissatisfaction, we are always ready to make improvements and amendments,” he explained.
What Does the Law State?
The Economic Act, 2083 (Nepali calendar) specifies the provisions regarding the equity tax imposed on the education and health sectors.
“Educational institutions operated by the private sector shall charge an education equity fee on all student fees according to Schedule-7, which will be used to improve access to quality education and infrastructure development,” reads Section 16 of the Education Equity Fee Bill.
“Health service providers in the private sector shall impose a health equity fee on all service charges collected from patients as per Schedule-8, which will be expended to enhance quality health service access and infrastructure,” states Section 17 of the Health Equity Fee.
What Is the Implementation Process?
Image source, RSS
Though the government has formally announced the decision, experts note that the statement by the Prime Minister on social media that the tax will not be implemented cannot be immediately enforced without completing the legal procedures.
As the law is recognized once the Parliament passes the fiscal year’s budget, any removal of the provisions mentioned in it requires following legal procedures.
The Economic Act provides provisions for changing government fees, taxes, or levies.
“Under any existing law, the government can reduce, increase, or exempt fees, levies, or taxes as needed,” states Section 18 of the Economic Act, 2081.
According to a former minister, the Finance Ministry must present a proposal to the Cabinet to obtain approval for such decisions.
“The decision can only be implemented after the Government of Nepal formally approves it,” former Law Minister Madhav Prasad Paudel told the BBC.
He added that since Parliament has already granted the government such authority to make amendments, a separate parliamentary approval for this specific change may not be necessary.
Opposition Parties Welcome the Decision
Gagan Thapa, chairperson of the main opposition party, Nepali Congress, has welcomed the government’s decision.
He remarked that not all citizens who choose private hospitals and schools are affluent; for many, it is a necessity rather than a luxury.
“Charging additional fees or taxes on services does not solve the problem. Therefore, imposing the equity tax was not about equality but an arrangement that would promote inequality,” Thapa, also a former health minister, stated on social media.
“The government has rightly removed the provision recognizing the economic and social realities.”
He also urged the completion of the required legal and administrative procedures for the proper implementation of the decision. “Please complete the legal and administrative processes to enforce this decision.”
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