Government to Remove 3% Equity Tax on Education, Health

Government Decides to Remove 3% ‘Equity Tax’ on Private Educational and Health Institutions

The government has decided to remove the 3% “equity tax” imposed on private educational and health institutions through the budget for the current fiscal year. The decision was taken after stakeholders and members of the public raised concerns and complaints regarding the tax.

Prime Minister Balendra Shah (Balen) announced the withdrawal of the tax through a Facebook post on Tuesday. Shah stated that the decision was reached after consultation with Finance Minister Dr. Swarnim Wagle. He said the government would make decisions with citizens’ interests at the centre and would always remain prepared to improve a decision when citizens expressed dissatisfaction with it.

The government had introduced the tax through the budget to raise resources for providing education and health services to citizens in remote and underdeveloped areas, supporting disadvantaged children and expanding health insurance. However, operators of private educational and health institutions had argued that the arrangement was impractical and had repeatedly requested the government to reconsider it.

Policy on 10% Free Seats and Hospital Beds to Continue

Although the equity tax will be removed, Prime Minister Shah said the government remains committed to implementing the policy requiring private hospitals to make 10% of their beds and private campuses and universities to make 10% of their seats available transparently and fairly.

Implementation and Tax Refund Process

Nabin Dhungana, Public Relations Adviser to the Finance Minister, said the Ministry of Finance was preparing to make a ministerial-level decision regarding the withdrawal of the tax and submit it to the Council of Ministers.

The arrangement will formally take effect only after the Council of Ministers approves the decision and a notice is published in the Nepal Gazette.

As the fiscal year has already begun, the tax must continue to be paid until the Gazette notice is issued. However, the Inland Revenue Department has stated that any tax already paid before the decision takes effect may be refunded.

Because the Education Equity Fee is payable monthly, the Department estimated that no transactions may have taken place under that category so far. Therefore, only the Health Equity Fee may need to be refunded. The Department stated that a procedure would be prepared and implemented if tax refunds are required.

Legal Provisions

As the budget has already been passed by the House of Representatives, the government will need to amend the Economic Bill to implement the decision to remove the tax.

Section 18 of the Economic Bill delegates authority to the government to reduce or increase tax rates or grant full or partial exemptions as required. A notice regarding an exemption provided under this section must be published in the Nepal Gazette, and the relevant details must be submitted to the Federal Parliament.

Section 16 of the Bill provided for the collection of the Education Equity Fee, while Section 17 provided for the collection of the Health Equity Fee.

Stakeholders Welcome the Decision

Stakeholders in the concerned sectors have welcomed the government’s decision to withdraw the tax.

The Nepal Medical and Dental College Association of Nepal, the Association of Private Health Institutions Nepal (APHIN), and the Private and Boarding Schools’ Organization Nepal (PABSON) said the decision would provide relief to the public.

Prof. Dr. Gyanendra Man Singh Karki, President of the medical and dental college association, said removing a provision that would have placed an additional financial burden on healthcare services was in the public interest.

Similarly, former PABSON President D.K. Dhungana described the decision as positive, stating that the government had addressed public expectations.