‘Cars priced below Rs 5 million will become cheaper, taxes increased only on luxury vehicles’

KATHMANDU – Finance Minister Dr. Swarnim Wagle has defended the government’s new vehicle taxation policy, claiming that cars priced below Rs 5 million will become more affordable under the budget while higher taxes have been imposed only on luxury vehicles.

Speaking at a post-budget interaction program organized by the Nepal Economic Journalists Association (NAFIJ) in Kathmandu on Monday, Wagle said the government’s objective was to ensure that taxation remains progressive and aligned with consumers’ purchasing capacity.

“Taxes have been increased only on luxury vehicles,” the finance minister said. “Vehicles priced below Rs 5 million will become cheaper, while adjustments have been made for higher-priced vehicles.”

Shift in EV Tax Policy

Wagle acknowledged that Nepal had provided significant tax incentives for electric vehicles (EVs) in recent years to accelerate market adoption and increase EV penetration. However, he argued that the market has now matured to a point where tax policies need to be adjusted according to economic realities.

“Driving an electric vehicle worth up to Rs 10 million is still a luxury. We all need to recognize that,” he said.

According to Wagle, Prime Minister Khadga Prasad Sharma Oli had instructed policymakers not to increase taxes on vehicles valued below Rs 5 million. As a result, the budget focused tax adjustments primarily on higher-priced vehicles.

“The intention was that increasing taxes on vehicles above Rs 5 million would not significantly affect ordinary consumers,” he said.

Valuation-Based Taxation Replaces Kilowatt-Based Approach

The finance minister also addressed concerns raised by automobile importers and dealers regarding the government’s decision to move away from the previous taxation framework that relied heavily on motor power ratings measured in kilowatts.

He said businesses had faced uncertainty after the Office of the Auditor General questioned the classification of vehicles imported under the kilowatt-based system.

“Automobile entrepreneurs were under pressure after audit authorities raised questions about imports categorized on the basis of kilowatts,” Wagle said. “The shift toward a value-based taxation system has provided relief to the industry.”

The government believes that a valuation-based tax structure is more transparent and easier to administer than a system primarily linked to vehicle power output.

EVs Not Entirely ‘Clean Energy,’ Says Minister

While reaffirming the government’s commitment to promoting electric mobility, Wagle argued that electric vehicles should not be viewed as entirely clean-energy solutions.

He pointed to the growing challenge of battery disposal and recycling, saying long-term battery management remains a complex environmental issue.

“Electric vehicles are not completely clean energy because battery management and disposal remain complicated issues,” he noted.

Budget Designed With a Five-Year Vision

Defending the broader fiscal plan, Wagle said the government had prepared the budget with a long-term perspective aimed at laying the foundation for economic transformation over the next five years.

He acknowledged that time constraints prevented the government from addressing every policy issue in the current budget but said additional reforms would be introduced in future budgets.

“This budget is intended to lay the foundation for the next five years,” Wagle said. “There was not enough time to address every issue. Some matters will be taken up in next year’s budget.”

The finance minister urged stakeholders not to expect all reforms and policy changes to be delivered through a single budget, emphasizing that the current administration has a five-year mandate and plans to implement reforms gradually.

Tax Debate Continues

The government’s decision to revise taxes on electric vehicles has generated significant debate among automobile dealers, environmental advocates, and consumers. While industry groups have expressed concerns that higher taxes on premium EVs could slow the pace of electrification, the government argues that the revised structure strikes a balance between revenue generation, environmental goals, and affordability for middle-income consumers.