Nepal’s Supreme Court on Wednesday barred the provincial governments from collecting taxes from Community Forest Users’ Groups (CFUGs).
Miffed by multiple taxation imposed by three governments—local, provincial and federal—five CFUGs had filed a writ petition at the apex court. In the writ petition CFUGs have demanded that ‘illegal tax’ imposed by the provincial governments should be scrapped.
Responding to the petition a five-member constitutional bench led by chief justice Bishwambar Prasad Shrestha ruled the provincial governments not collect taxes from community forest users’ group until the final verdict.
The bench has argued that the decision to impose taxes by the provincial government contradicts some constitutional provisions.
Even as article 60 (1) of the constitution mandates the federal, provincial and local governments to impose taxes on matters falling within their respective competence and collect revenue, the federal government is responsible for determining taxes on matters enumerated in the concurrent list and on matters that are not contained in the list of any level.
After Nepal adopted a federal set up in 2015 the federal government had mandated the local government to collect ten percent of the total income as local taxes. Based on mandates local governments collect 10 percent tax from income of community forest user’s groups. Apart from local taxes, the federal government itself has been collecting income tax from CFUGs.
Yet, provincial governments imposed additional taxes on income of community forest users ranging from 15 to 40 percent of total transaction. To impose hefty taxes on community forest users’ groups the provincial governments have introduced their own forest act and financial acts. Both the federal government and Federation of Community Forest User’s Nepal, an umbrella organization of CFUGs, were not consulted while promulgating provincial forest law.
Having no other option, the federation, which represents more than 22,400 CFUGs, had launched both legal and street protests. FECOFUN covers more than 2.9 million households and 2.3 million hectares of forest have been managed and used by forest users.
Because of community efforts Nepal’s forest coverage has increased to 45 percent of the total land in 2016 from 26 in the late 80s. Its global fame is increasing. But the multiple taxation and frequent intervention from the government aimed at capturing resources hardly grown by community people complicates the situation.
So far, five provinces—Madhes, Lumbini, Bagmati, Karnali and Sudurpakschim—have introduced their forest laws to collect tax from CFUGs. The provincial forest bill introduced by the Gandaki provincial government is under consideration at the parliament. Koshi province hasn’t yet promulgated a forest act.
The Madhes province collects 15 percent taxes from community forest users’ groups whereas Sudurpakshim province has imposed the highest taxation—45 percent.
CFUGs have been protesting for years demanding that the multiple taxes on community forestry be scrapped. As demanded the apex court has ordered the government of Nepal to explain the reason for multiple taxation forest whereas provincial governments are temporarily barred from collecting.
“In response to writ petition filed by community forest user’s groups the supreme court has ordered the provincial governments not to collect taxes from internal and external selling of community forest groups until the row is settled,” said advocate Dilraj Khanal, who has been defending the case on behalf of forest user’s group adding, “The court stayed the provincial government from collecting taxes as the move contradicts with the Constitution.”
The final verdict is awaited.
Forest users’ groups are elated with the court decision. “The decision to stop tax collection from community forestry is a welcoming move,” said Thakur Bhandari, president of FECOFUN, adding, “We want to see total annulment of such anti-forest provincial laws.”
