Here’s the main paragraph in the draft constitution on the distribution of tax and funding powers between federal, provincial (or state) and local level. For details on types of taxes, see Schedule 4 to 7 in the appendix section.
Paragraph 64. Distribution of sources of revenue: (1) The federation, province and the local level entity shall impose tax on subjects within their fiscal jurisdiction and collect revenue from such sources.
Provided that with regard to the source that are not included in the concurrent/shared list or in any list at any level, it shall be as determined by the Government of Nepal.
(2) The Government of Nepal shall make necessary arrangements to equitably distribute the revenue generated by it from its sources, between the federation, province and the local level entities.
(3) The amount of the fiscal transfer the province and the local level entities are to receive shall be as recommended by the National Natural Resources and Fiscal Commission, as provided for in Part 25.
(4) The Government of Nepal shall distribute fiscal equalization grants to province and local level entity on the basis of their need for expenditure, their capacity in generating revenue and the efforts made by them.
(5) The province shall distribute fiscal equalization grants received from the Government of Nepal and the revenue generated from its sources, to the local level entities under it on the basis of need for their expenditures and their capacity to generate revenue, in accordance with provincial law.
(6) The Government of Nepal shall make arrangements regarding conditional grants to be provided through the Federal Consolidated Fund, complementary grants, or the special grants for other purposes.
(7) The distribution of revenue between the federal, provincial and the local level entity shall be transparent.
(8) While enacting the federal Act regarding revenue distribution, the matters that need to be included are: national policy, national needs, the autonomy of provinces and local level entities, the service delivery of the provinces and local level entities and the fiscal rights given to them; their capacity to generate revenue; their contribution to development works; regional imbalance; poverty and inequality; exclusion, emergency works and the support of meet temporary needs.
