June 24, 2016 Print

It used to be that to own a motorbike in Nepal was a luxury — something extravagant, like owning a BMW or a Porsche. As Nepal has become more and more industrialized, though, motorbikes have become not only common but a necessity for many Nepalese citizens in their daily lives. Still, the government continues to tax motorbikes as though they are still a luxury good. Bikalpa, an Alternative, an Atlas Network partner located in the Nepalese city of Biratnagar, recently produced a video describing how the government’s tax on motorbikes is actively hurting the economy.

“Only two and a half decades ago, it was seen as a luxury good in Nepalese society,” the Bikalpa video explains. “Those days, people who owned a motorbike, their economic status was considered to be high compared to other members of society, because it was within the reach of very few people. But nowadays, due to people’s increasing income, massive production, globalization, and daily necessity, a motorbike is within the reach of many people. Today, this vehicle is a daily need of common people. To go to work, do shopping, travel, meet and gather, drop the children at school, merchandise goods, an for other purposes, motorbikes have eased the daily lives of people”

Bikalpa’s video uses Nepal’s neighbor, India, as a comparison. A bike that costs NPA (Nepalese Rupees) 82,000 in India costs NPR 169,500 in Nepal, while another model that costs NPR 117,411 in India costs NPR 226,900 in Nepal. According to World Bank data, India’s per capita income is $1,581, whereas Nepal’s is $701. Even though the average Indian citizen has twice the purchasing power of her or her Nepalese equivalent, the Nepalese citizen has to pay twice as much for a motorbike.

There are multiple reasons for these increased prices within Nepal, but a primary culprit is the “renewal tax.” This is a one-time cost in India, yet the same tax is imposed yearly in Nepal. It costs NPR 4,040 annually to renew a 150cc bike. Within a span of 15 years, a Nepalese citizen with a motorbike will have spent the same amount in taxes as the cost of an entirely new bike in India.

After combining this tax, custom duty, local tax, VAT, road tax, registration, and vehicle tax, the Nepal government collects approximately 127 percent tax on motorbikes, making an increasingly necessary mode of transportation prohibitively expensive. Bikalpa explains that the government should “prioritize motorbikes as a necessity rather than a luxury,” thereby lowering the required taxes and making the motorbikes more accessible to the general public.

The Bikalpa video illustrates this point by using a local milkman as an example. Before he had a motorbike, this milkman had worked on a cow ranch for about $50 a month. After acquiring a bike, however, he was able to sell about 450 liters of milk each day, allowing him to earn about $700 to $800 a month. His bike ownership meant that he spent less time traveling, and had the means to bring more milk to a much larger geographical area. This also gave him more time to spend with his family, or to pursue other income-generating activities. Money currently being spent on the exorbitant taxes associated with motorbikes could instead be invested, or spent in local markets, helping generate new wealth and promote economic growth.

Tucked away between India and China, Nepal has long been overshadowed by the geopolitical giants it has for neighbors. Bikalpa believes, however, that Nepal has the potential to quickly climb the ranks of economic powers, pointing to how the economic reforms of India and China have allowed those countries to become examples of “rags-to-riches” economic success stories. In order to reach that goal, Bikalpa explains, Nepal needs to foster a “favorable environment for investment, production, rule of law, and sound economic policies.” Every great journey must start with a single step, and Nepal can take a decisive step down the path to greater prosperity by eliminating punitive motorbike taxation.