Role of Tax Towards Government Revenue of Nepal

A modern government collects required funds through different sources; mainly from revenue and debt. Among different sources, taxation is the most important sources of government revenue and Gross Domestic Product (GDP) of a nation. In this paper, an attempt has been made to examine the contribution of tax revenue to GDP and government revenue of Nepal. The main questions addressed for the study were to find the proportion of tax in government revenue collection and to know whether the resource gap of Nepal is in increasing or decreasing trend. This study is mainly based on secondary data collected from government sources. Nationwide data of both direct and indirect taxes, total government revenue and GDP for the period of last fifteen years from F/Y 2002/03 to F/Y 2016/17 have been taken for the study. In order to assess the contribution of tax revenue on government revenue and GDP, co-relation and multiple regression analysis have been done separately and the results have been verified by using test statistics (t-test and f-tests). Similarly, to observe the long-term growth of tax revenue, time series analysis has been done by using straight line trend method. The study has concluded that GDP and government revenue have been strongly related with direct and indirect tax revenues of Nepal.