Nepal Withdraws 3% Equity Tax on Private Education, Health Sectors After Public Backlash

Nepal's government has suspended the implementation of a controversial 3% equity tax on private education and health services, just days after it came into force, following widespread criticism from citizens, political parties, media and industry stakeholders over concerns that it would increase the financial burden on students and patients. Prime Minister Balendra Shah announced the decision on Tuesday after consultations with Finance Minister Swarnim Wagle, saying the levy would not be enforced "for now."

The tax, introduced in the national budget for the new fiscal year, took effect on July 17. According to Shah, the measure was originally intended to broaden Nepal's tax base, organise the economy and generate resources to improve access to education and healthcare, particularly for disadvantaged communities. Reports said the government also planned to use the revenue to expand health insurance and fund welfare programmes.

Explaining the reversal, Shah said the government recognised that the levy would impose additional costs on the public. "This government is people centred, based on the trust and expectations of the people," he said, adding that every government decision would prioritise citizens' welfare and could be revised if people expressed dissatisfaction.

However, the announcement has also triggered legal questions. Since the levy was introduced through Nepal's Finance Act after parliamentary approval, legal experts say a formal Cabinet decision and legislative process will be required to officially suspend or amend the tax. Finance Minister Wagle has said the Cabinet proposal is being prepared and described the move as a temporary suspension rather than a permanent withdrawal. Uncertainty also remains over whether taxpayers who paid the levy between July 17 and July 21 will receive refunds.