Government turns to tax arrears recovery to meet ambitious revenue target

Nepal's government is turning to the recovery of long-pending tax arrears as a key strategy to meet ambitious revenue targets for the upcoming fiscal year. Finance Minister Swarnim Wagle aims to collect over 100 billion rupees from disputed and unpaid taxes, a crucial component of the government's goal to raise 1.4 trillion rupees in total revenue.

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The target is to collect at least Rs100 billion from tax arrears. The possibility of achieving this appears realistic.

This initiative, introduced through the Finance Bill, 2026, offers taxpayers a settlement facility. Those with cases pending before tax authorities or judicial bodies can withdraw their disputes by paying the assessed tax amount along with an additional one percent. In return, the government will waive accumulated fees, additional charges, penalties, interest, and late payment charges. This aims to encourage taxpayers who have avoided payments due to prolonged litigation.

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This facility does not reduce the original tax liability. Taxpayers must pay the assessed tax amount. However, they have been allowed to settle by paying an additional one percent on the initially assessed tax amount, while additional charges, penalties and other liabilities have been waived.

Officials believe this scheme is realistic and could bring businesses operating informally into the formal economy. The federal government needs to collect over 1.5 trillion rupees in total revenue, including provincial and local government shares, to retain 1.405 trillion rupees. The settlement facility, available until mid-January 2027, is designed to help taxpayers settle dues accumulated for various reasons, without reducing the original tax liability but waiving associated penalties and charges.

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We have introduced this scheme for long-pending tax dues, unsettled audit issues and cases that have remained in