Nepal tax authority plans to end-to-end online tax services to boost transparency and efficiency

KATHMANDU: Nepal’s tax administration is set to undergo a major digital overhaul, with authorities targeting full online issuance of all tax clearance certificates within the next 18 months, a move aimed at reducing physical interaction, curbing corruption risks, and improving efficiency across the revenue system.

According to officials, preparatory work has already begun, and the goal is to ensure that by the end of fiscal year 2083/84 (mid-2027), all tax clearance certificates will be issued exclusively through digital platforms. Once fully implemented, taxpayers will no longer be required to visit tax offices to obtain clearance documents, except in limited cases related to audits.

A key structural reform under the plan is the introduction of a “faceless” audit system. Under this model, taxpayers will not know which tax office or official is responsible for auditing their accounts. The system allows tax-related services to be delivered from any office to taxpayers located anywhere in the country, irrespective of geography. This approach, already practiced in several advanced economies, is intended to eliminate collusion, discretionary influence, and bribery within tax administration.

The digital shift is also expected to significantly reduce direct contact between taxpayers and tax officials. Authorities say that once all core services move online, documentation, filing, and certification processes will be completed electronically, minimizing opportunities for informal negotiations and procedural delays.

At the local level, most routine tax-related work is already being handled through municipalities, reducing the need for taxpayers to approach federal tax offices. Several services have already been digitized. Individuals holding a national identity card can currently apply for a personal permanent account number (PAN) entirely online.

Building on this, the tax authority is preparing to make proprietorship business PAN registration fully online by mid-2084 (mid-2027). Under the proposed system, individuals with a national identity card operating a proprietorship business will be able to receive their PAN certificate online, regardless of where the business is registered.

Progress has also been made in online tax clearance issuance. Taxpayers with a single employer and annual income of up to Rs 3 million are already able to obtain tax clearance certificates digitally. This includes several existing tax categories, while remaining categories—particularly certain D3 and D4 filings—are scheduled to be brought under the online system within the next fiscal year.

By the end of fiscal year 2083/84, authorities aim to ensure that even higher-category tax clearance certificates can be obtained from home, completing the transition to a largely paperless process. While physical visits to tax offices may still be required for audits, plans are in place to simplify and decentralize audit-related procedures as well.

The reform agenda is being supported by strong revenue performance. In fiscal year 2081/82, a total of 773,933 new taxpayers were added to the system. During the same period, the tax authority collected Rs 583 billion in revenue. This included Rs 292 billion from income tax, Rs 146 billion from value-added tax, Rs 122 billion from excise duty, Rs 9.4 billion from health service tax, Rs 3.61 billion from education service fees, and Rs 1.21 billion from other charges.

The authority accounted for 49.52 percent of total national revenue in fiscal year 2081/82, slightly lower than the 50 percent contribution recorded in the previous year.

Operational efficiency has also improved. The cost of tax collection declined to Rs 3.05 per Rs 1,000 collected in fiscal year 2081/82, down from Rs 3.84 in the previous year. Officials attribute this reduction to increased use of digital systems and process automation.

Looking ahead, the tax authority plans to expand taxpayer education programs, strengthen market monitoring, and further modernize compliance checks through e-assessment and faceless audits. Advanced technologies, including artificial intelligence and business process re-engineering, are slated for rollout in the coming years, with the objective of making tax services fully paperless, contactless, and more transparent while boosting overall compliance and revenue mobilization.