Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: A sustained slowdown in Nepal’s stock market has significantly impacted government revenue, with capital gains tax collected from share transactions declining by 47.07 percent in the first eight months of the current fiscal year.
According to official data, the government collected NPR 6.44 billion in capital gains tax from share trading during the review period. In contrast, during the same period last fiscal year, revenue from capital gains tax stood at NPR 12.1696 billion, indicating a sharp contraction in market activity and investor participation.
The decline has been particularly severe in the month of Falgun. Capital gains tax collection fell by 58.54 percent year-on-year, dropping to NPR 551.5 million this year from NPR 1.33 billion recorded in the same month last year.
Government data shows fluctuating but overall declining tax collection trends throughout the fiscal year. Capital gains tax revenue stood at NPR 2.1575 billion in Shrawan, followed by NPR 601.4 million in Bhadra, NPR 243.9 million in Ashoj, NPR 380 million in Kartik, NPR 629.8 million in Mangsir, NPR 584.3 million in Poush, and NPR 1.29 billion in Magh.
Despite intermittent rebounds, the broader trend reflects weakening trading volumes and reduced speculative activity in the secondary market.
The downturn in tax collection aligns with a cooling stock market. The NEPSE Index, which had reached a four-year high of 3,002 points in the second week of Shrawan, has since declined and currently stands at around 2,812 points.
Analysts attribute the decline in trading activity to profit booking after the market peak, tightening liquidity conditions, and cautious investor sentiment.
Values are in Lakhs (100,000s)
Market activity was also affected by external factors. Trading was halted for nearly a week following protests linked to the “Gen Z movement” on Bhadra 23 and 24, which disrupted investor confidence and market momentum.
However, some recovery has been observed in recent weeks. Following the House of Representatives by-election held on Falgun 21, investor sentiment has shown signs of improvement, contributing to a modest uptick in market activity.
The sharp fall in capital gains tax underscores the government’s growing vulnerability to fluctuations in financial markets. As Nepal increasingly relies on non-traditional revenue sources such as stock market taxation, volatility in trading volumes directly affects fiscal performance.
With the stock market yet to regain strong momentum, revenue pressures may persist in the coming months, adding to broader fiscal challenges faced by the government.
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