(1) The Federation, State and Local level
may impose taxes on matters falling within their respective jurisdiction and collect
revenue from these sources.
Provided that provisions relating to the imposition of taxes and collection
of revenue on matters that fall within the Concurrent List and on matters that are
not included in the List of any level shall be as determined by the Government of
Nepal.
(2) The Government of Nepal shall make provisions for the equitable
distribution of the collected revenue to the Federation, State and Local level.
(3) The amount of fiscal transfer receivable by the State and Local level
shall be as recommended by the National Natural Resources and Fiscal
Commission.
(4) The Government of Nepal shall, on the basis of the need of
expenditure and revenue capacity, distribute fiscal equalization grants to the State
and Local level.
(5) Each State shall, in accordance with the State law, distribute fiscal
equalization grants out of the grants received from the Government of Nepal and
revenues collected from its sources, on the basis of the need of expenditure and
revenue capacity of its subordinate Local level.
(6) Provisions relating to distribution of conditional grants,
complementary grants or special grants for other purposes to be provided by the
Government of Nepal from the Federal Consolidated Fund shall be as provided for
in the Federal law.
(7) Distribution of revenues between the Federal, State and Local level
shall be made in a balanced and transparent manner.
(8) A Federal Act on the distribution of revenues shall be made having
regard to the national policies, national requirements, autonomy of the State and
Local levels, services to be rendered by the State and the Local level to the people
and financial powers granted to them, capacity to collect revenues, potentiality and
use of revenues, assistance to be made in development works, reduction of
regional imbalances, poverty and inequality, end of deprivation, and assistance to
be made in the performance of contingent works and fulfilment of temporary
needs.