Nepal - Municipal Revenue Enhancement Project - Inception Phase: 01.02.2026 - 16.07.2026 Phase I: 17.07.2026 - 31.12.2029 Duration: 01.02.2026 – 31.12.2029 (47 months)

Nepal`s Constitution sees the local government (LG) as closest to its people with an important service delivery function. To enact this important role, the Constitution empowers local governments with a series of competences and responsibilities in particular it empowers LGs, to introduce and manage 12 different types of local taxes. Among others, these include property and house rent taxes, land and building registration fees, tourism fees, business and advertisement tax. Local Governments performance in own source revenue (OSR) generation in Nepal varies across municipalities, for most, inter-governmental fiscal transfers remain the main source of financing. Frequent delays in the latter, unclear concurrent inter-governmental tax regimes, low incentives and support for LGs to effectively raise and strategically use OSR thus undermine LGs` fiscal autonomy and their capacity to deliver the expected range of inclusive services to their constituencies. On the demand side, tax compliance is also very low. These gaps hence undermine progress in building a fiscally efficient federal state. The Municipal Revenue Enhancement Project (MunRev) aims to address these gaps.