- Prime Minister Balendra Shah suspended the 3% equity levy on education and health sectors following public criticism over increased costs for essential services.
- Originally designed to fund social welfare, the levy faced backlash for burdening low-income families and making healthcare and education less affordable.
- Legal experts emphasize that formalizing the suspension requires specific legislative procedures and official cabinet approval to override the existing annual budget.
- The move reveals policy disagreements within the government, as the Finance Minister previously advocated for the levy to support marginalized communities.
Kathmandu. Prime Minister Balendra Shah has announced that the government will suspend the implementation of the 3 percent equity levy imposed on the education and health sectors, responding to growing public criticism and concerns over the additional financial burden on citizens.
Prime Minister Shah announced the decision on Tuesday through social media platforms, including Facebook and X, stating that the government had taken the step after considering widespread opposition and suggestions from citizens. He said the decision was guided by the government’s commitment to keeping public interest at the centre of its policies.
“Taking into account the widespread opposition and suggestions from citizens, the government has decided not to implement the 3 percent equity levy on education and health sectors for the time being,” Shah said.
The announcement came after strong reactions from parents, students, private education and health service providers, and other stakeholders who argued that the additional charge could increase the cost of essential services and make education and healthcare less affordable, particularly for low- and middle-income families.
The government had introduced the 3 percent equity levy with the stated objective of mobilizing resources for social welfare programmes, including improving access to quality education and healthcare services for disadvantaged communities. The levy was also linked to broader government efforts to support marginalized groups and expand social protection programmes.
However, critics had questioned the necessity and timing of the levy, arguing that imposing additional charges on education and healthcare could negatively affect citizens already facing rising living costs.
Legal and Procedural Questions
Although the prime minister’s announcement has received public attention, questions have emerged regarding the legal process required to withdraw or suspend a tax measure that was introduced through the annual budget and approved by the federal parliament.
According to Nepal’s financial and legal procedures, changes to tax rates or exemptions cannot be made solely through an executive announcement. Any amendment generally requires a formal proposal from the Ministry of Finance, approval by the Council of Ministers, notification to the federal parliament and publication in the Nepal Gazette.
Officials and legal experts have pointed out that the government must complete the required legal procedures before the decision can become formally effective. As of Tuesday, the Ministry of Finance had not reportedly submitted an official proposal to the Council of Ministers regarding the removal of the levy, and the cabinet had not issued a formal decision.
Therefore, while the prime minister’s announcement represents the government’s policy direction, its practical implementation depends on completing the necessary legal process.
Difference of Views Within Government
The decision has also revealed differences in approach within the government regarding taxation, public finance and social investment.
Prime Minister Shah said the decision was taken after consultation with Finance Minister Dr. Swarnim Wagle. However, Finance Minister Wagle had previously defended the 3 percent equity levy, arguing that the measure was necessary to generate resources for programmes aimed at reducing inequality and improving access to essential services.
Minister Wagle had maintained that the levy was not intended merely as a revenue-generating tool but as a mechanism to support vulnerable communities. According to him, the collected resources were expected to contribute to expanding quality education and healthcare services in remote and underdeveloped areas, supporting children from Dalit, marginalized and economically disadvantaged communities, and strengthening the country’s health insurance system.
The timing of the prime minister’s announcement has raised questions about policy coordination within the government, as the finance minister had been publicly defending the levy while discussions over its removal were taking place.
Balancing Public Relief and Resource Management
The controversy surrounding the equity levy highlights a broader challenge facing governments: balancing citizens’ immediate economic concerns with the need to secure sustainable resources for public services.
Education and healthcare are among the most sensitive sectors directly affecting citizens’ daily lives. While reducing additional financial burdens on citizens is widely seen as a positive step, experts have emphasized that governments must also ensure alternative funding mechanisms to maintain and expand social programmes.
Analysts say the government must now clarify how it plans to compensate for the potential revenue shortfall resulting from the suspension of the levy. Without a clear alternative financing strategy, programmes designed to support disadvantaged groups could face resource constraints.
Government’s Next Steps
Following the announcement, the government is expected to initiate the formal process required to amend the existing tax provision. It will also need to clarify whether the suspension is temporary or permanent and how affected social programmes will be financed in the future.
The decision has placed the government at the centre of a wider debate over taxation, social justice and economic governance. While the announcement has addressed immediate public concerns, its long-term significance will depend on the government’s ability to combine legal compliance, fiscal responsibility and effective delivery of education and healthcare services.
For now, the issue remains a test of the government’s commitment to both public accountability and sustainable policymaking.
