Karnali local levels perform poorly in revenue mobilisation

By Rajani Yogi,Surkhet, Aug. 22: Birendranagar Municipality had set a target of raising Rs. 365.8 million in internal revenue for the last Fiscal Year 2024/25. However, the municipality managed to collect only Rs. 193.2 million, half of the annual target. 

Despite being the capital of Karnali Province, Birendranagar has shown weak performance in terms of internal revenue. It is not only the provincial capital but also the largest municipality in Karnali Province. 

With the highest population density among the local bodies in the province, it also sees more economic activities compared to other municipalities. Meanwhile, it is progressing towards becoming a sub-metropolitan city. But it has remained weak in terms of generating revenue from its own sources.

Local governments identify local resources and levy taxes for transportation, housing, economic and community development, environment, recreation, amenities, and livelihoods. According to Birendranagar’s Information Officer, Tanka Prakash Lamichhane, the main sources of income for the municipality are house rent tax and map approval fees. 

Although the municipality failed to meet its revenue targets in previous years, for the FY 2025/26, it has set a target of Rs. 513.5 million in internal revenue.

Not only Birendranagar, but most local governments in Karnali have also shown only slight improvement in internal revenue compared to previous years, with no significant progress. Due to weak internal revenue generation, local governments continue to rely on grants from the federal and provincial governments. The lack of internal revenue sources has led to local governments falling short of their targets.

Likewise, Bheriganga Municipality’s revenue target for the FY 2023/24 was Rs. 47.8 million, but only Rs. 45 million was collected. Chief Administrative Officer Krishna Prasad Pokharel said that a plan has been formulated to increase revenue collection by widening the tax base. More revenue has been generated from mining royalties, land tax, house rent tax, and business registration and renewal fees. 

The municipality has set a target of Rs. 48.2 million in internal revenue for the current fiscal year. The collected taxes are used for development and construction activities within the municipality.

Similarly, Barahatal Rural Municipality had set the internal revenue targets for FY 2024/25 at Rs. 4.979 million. Although it came close, the target was not fully achieved as it collected Rs. 4.474 million. According to Chief Administrative Officer Prem Bahadur DC, the current fiscal year’s target is to meet 70 per cent of internal revenue requirements.

Even though the law allows local levels to collect nine different types of taxes, they have shown little interest in revenue collection. According to civil society representative Tirtha Bahadur Thapa, local governments tend to avoid revenue collection due to the cumbersome procedures involved.