Nepal's Working Class: High Taxes, Poor Services Fuel Frustration

Nepal's working class is caught in a frustrating paradox: they bear some of the highest tax burdens in South Asia, yet the public services they receive in return are woefully inadequate. With a top personal income tax rate of 39 percent, many citizens question where their money is going. The reality, as tax experts point out, is that these high rates aren't even generating substantial revenue, with only a fraction collected from the highest earners.

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Actually, only around Rs 4–5 billion is collected from this high rate.

The new government, led by the Rastriya Swatantra Party, has an opportunity to enact meaningful change. Finance Minister Swarnim Wagle, an economist himself, has signaled a commitment to reforming the tax system, emphasizing the need to protect the middle class. This focus on reducing tax burdens and fostering service-based industries for export is a welcome departure from traditional approaches.

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the middle class must be protected for the country to prosper, and that tax burdens on this group should be reduced.

However, the core issue remains the stark disconnect between taxation and public services. Hospitals lack quality care, schools struggle with low trust, and infrastructure like roads and public transport is insufficient. This forces the middle class to shoulder high taxes while also bearing significant private expenses for healthcare and education. Without corresponding improvements in public services, high tax rates risk discouraging compliance and fueling evasion. The upcoming budget on May 29 will be a critical test of the government's ability to address these deep-seated issues and build a more equitable system for Nepal's working citizens.

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the need to reform the tax system to reduce the tax burden on the middle class, promote service-based industries, and create opportunities to export services globally.