Nepal’s Revenue Falls 10.5% in 2025/26 as Non-Tax Income Collapses

Nepal’s government revenue collection dropped sharply by 10.5% year-on-year in the first month of 2025/26, totaling Rs. 84.7 billion compared to Rs. 94.7 billion in the same period last year. The decline has been largely attributed to a dramatic collapse in non-tax revenue, which plunged by 78.1%, falling from Rs. 17.3 billion to just Rs. 3.8 billion.

While tax revenues showed mixed trends, the largest contributors—Value Added Tax (Rs. 27.6 billion, +4.8%), Customs (Rs. 16.6 billion, +4.8%), and Excise Duty (Rs. 13.9 billion, +14.8%)—registered growth. However, Income Tax collections slipped by 1.8% to Rs. 22.4 billion, raising concerns about business profitability and compliance. Meanwhile, Educational Service Tax posted strong growth of nearly 70%, albeit contributing a small share (0.5%).

The biggest concern remains the steep fall in non-tax revenue, which previously included significant inflows from dividends, royalties, and administrative charges. Its contribution to total revenue dropped from 19.7% to just 4.5%, exposing the government’s overdependence on traditional tax sources.

Economists caution that while revenue buoyancy in VAT, customs, and excise indicates sustained consumption and imports, the weakness in income tax and non-tax collections could strain Nepal’s fiscal stability. The government faces the challenge of broadening the tax base and improving state-owned enterprise performance to reduce reliance on unstable non-tax revenues.