Nepal's Slow Progress on Tobacco Tax

Nepal is making slow progress in increasing taxes on tobacco products. This has put the country far behind the targets set by the World Health Organization (WHO). Using the tax system is seen as the most powerful strategy worldwide to reduce the consumption of harmful tobacco products.

Current Tax Situation and Industry Deception

The total tax on tobacco products in Nepal, including value-added tax, health risk tax, and excise duty, is only 51 percent. However, government officials admit that the tobacco industry spreads false information, claiming the tax is 71 percent by presenting fake data to the government. Health experts say this incorrect figure is very harmful for public health policy.

Problematic Government Practices and Weak Laws

In a controversial move, the government has been rewarding tobacco companies based on the amount of tax they pay. This practice is actually illegal under Nepal's existing Tobacco Control Act of 2061 and its related guidelines from 2074. This action weakens the government's own control campaigns. Experts stress that controlling tobacco should not rely only on collecting revenue. They say public health must be the priority.

Falling Short of International Goals

Nepal became a member of the WHO's Framework Convention on Tobacco Control in 2014. According to this, the goal was to increase taxes to 70-75 percent. Nepal has failed to meet this target. Another issue is that the government's annual budget speech groups tobacco and alcohol together and does not give clear details on how much tax is being applied to which specific tobacco products.

The Need for Strategic Tax Reform

Researchers point out that small, general increases in excise and health risk taxes are not enough. These minor adjustments do not even keep up with inflation and do not lead to a real reduction in consumption. To be effective, Nepal needs a high and strategic tax policy that prioritizes public health. This would require stopping the industry's misleading propaganda, correcting government mistakes, and making local authorities more active.

Potential Benefits of Higher Taxes

A study estimates that a 39 percent increase in excise duty could contribute an additional 14 billion rupees in tax revenue. It could also reduce consumption by 4 to 8 percent by raising the price per stick by about 1.27 rupees. A larger, 60 percent excise increase could contribute 20 billion rupees, helping to cover about 9 percent of the budget deficit, and reduce consumption by 7 to 13 percent. At the current slow pace, it will take Nepal about 3 years to reach India's tax level and about 6 years to meet the WHO's recommendation.

Existing Fines and Penalties

Nepal's Tobacco Control Act does set fines for various offenses. These include a 100 rupee fine for smoking in public places, a 1,000 rupee fine for managers who do not post no-smoking signs, a 50,000 rupee fine for selling without production information, a 100,000 rupee fine for advertising, and a 10,000 rupee fine for selling to minors or pregnant women.